Why is CCL Internationa falling/rising?

Intraday Volatility and Trading Dynamics

On 18 December, CCL International experienced significant price swings, with the stock touching an intraday high of ₹27.50, up 2.57%, before plunging to a low of ₹23.81, down 11.19%. This wide trading range of ₹3.69 highlights heightened volatility, further underscored by an intraday volatility measure of 7.17%. The weighted average price indicates that a larger volume of shares traded closer to the day’s low, signalling selling pressure. Additionally, the stock’s price remains above its 5-day moving average but below its 20-day, 50-day, 100-day, and 200-day averages, suggesting a mixed technical outlook with resistance at longer-term levels.

Declining Investor Participation

Investor engagement appears to be waning, as evidenced by a sharp 75.49% drop in delivery volume on 17 December compared to the five-day average. This decline in participation may reflect cautious sentiment among shareholders, potentially contributing to the stock’s inability to sustain recent gains. Despite adequate liquidity for sizeable trades, the stock underperformed its sector by 6.48% on the day, signalling relative weakness within its peer group.

Fundamental Performance: Bright Spots Amid Challenges

CCL International has reported positive results for three consecutive quarters, with net sales for the latest six months rising by an impressive 87.12% to ₹13.66 crores. Profit after tax (PAT) for the nine-month period has also increased to ₹3.06 crores, reflecting a 139% rise in profits over the past year. The company’s half-year return on capital employed (ROCE) stands at a healthy 5.64%, with an average ROCE of 4.6 indicating an attractive valuation relative to capital employed. The stock trades at a discount compared to its peers’ historical valuations, supported by a low PEG ratio of 0.1, which suggests that the market may be undervaluing its earnings growth potential.

Long-Term Weakness and Market Underperformance

Despite these encouraging short-term results, the company’s long-term fundamentals remain a concern. The average ROCE over a longer horizon is a modest 1.95%, signalling limited efficiency in generating returns from capital. Moreover, the company’s ability to service its debt is weak, with an average EBIT to interest coverage ratio of just 0.39, raising questions about financial resilience. This fundamental frailty is reflected in the stock’s performance relative to the broader market. Over the past year, while the Sensex has delivered a positive return of 5.36%, CCL International’s shares have declined by 20.94%. Year-to-date, the stock is down 23.94%, contrasting sharply with the Sensex’s 8.12% gain. Even over the last month, the stock has fallen nearly 18%, while the benchmark index has remained almost flat.

Technical and Sentiment Factors Driving the Recent Decline

The recent price drop follows four consecutive days of gains, indicating a trend reversal that may be driven by profit-taking or renewed investor caution. The stock’s failure to break above longer-term moving averages could be interpreted as resistance, limiting upside momentum. The combination of high volatility, declining delivery volumes, and underperformance relative to sector peers suggests that investors are reassessing the risk-reward profile of the stock amid mixed fundamental signals.

Conclusion: A Stock at a Crossroads

In summary, CCL International’s share price decline on 18 December is the result of a complex interplay between encouraging recent earnings growth and persistent long-term fundamental weaknesses. While the company has demonstrated strong sales growth and profit expansion, its inability to consistently generate high returns on capital and service debt effectively weighs on investor confidence. The stock’s underperformance relative to the Sensex and sector peers, combined with technical resistance and falling investor participation, has culminated in a sharp price correction. Investors should carefully weigh these factors when considering exposure to CCL International, balancing its growth potential against structural challenges and market sentiment.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →