BRICS PCG has given a 'Buy' recommendation for CCL Products with a target price of Rs 698.The company's Q1FY07 results reveal a muted 12.7% sales growth at Rs 30.94 crore due to a 30-day plant shutdown during the quarter. However, the performance on the operating margin front has been a huge positive surprise, as it vaulted from 27.3% in Q1FY06 to 35.2% in Q1FY07, led by a marked reduction in raw material and packaging costs.The exponential growth in EBITDA helped CCL to maintain a decent 29.1% growth in PAT at Rs 9.09 crore.Despite the subdued sales during the first quarter, BRICS PCG projects a sales growth of 49.7%, as the revenues which would have been booked during Q1 will spill over into the succeeding quarters, and the company's enhanced capacity will also begin to yield returns.Although coffee prices have been on the upswing since FY02, CCL has been able to maintain its margin consistently over the years by virtue of prudent costing and the increase in value-added products.
