CCL Industries Inc

CCL Industries Inc (TSX: CCL.B) is a Canada-based company, which is primarily involved in the manufacturing of labels, consumer printable media products, technology-driven label solutions, polymer banknote substrates and specialty films.

Why should Investor’s book profit?

• Increasing cost pressure: Despite topline growth recorded by the company in the third quarter of FY21, the company is not able to expand margin because of the surge in the film prices, which is key raw material for the company. Operating income declined to CAD 223.9 million, compared to CAD 246.3 million for the third quarter of 2020 and Adjusted EBITDA declined 6.7% to CAD 299.5 million for the third quarter of 2021, compared to CAD 321.1 million for the third quarter of 2020.
• Resurgence of COVID cases: Holiday travel plans around the world continue to be disrupted with thousands of flights cancelled for the Christmas weekend as Covid infections surge. Despite early findings that Omicron is milder than other variants, scientists are concerned by the sheer number of infections being recorded. A fast spread in the omicron cases could hamper industrial packaging segment growth.
• Technical weakness: On daily price chart, CCL.B shares have moved below the crucial short-term support of 50-day SMA and registered a closing below it, implies a short-term technical weakness in the stock. Moreover, its shares are facing strong resistance near 100-day SMA of CAD 68.18, a deceive breakout above these levels should be tracked.

Technical price chart (as on December 24, 2021). Source: REFINITIV, Analysis by Kalkine Group 

Stock recommendation

Heightened uncertainties on the back of resurgence of the COVID-19 cases could bring sharp volatility in the market. Also, despite revenue growth the company has reported in the quarter just gone by, the company is not able to report margin expansion because of increase in the cost of raw materials. Moreover, over the past two trading session the relative strength in the stock was weak against the broader market and CCL.B share reported two straight days of negative close and moved below the crucial short-term support level of 50-day SMAs, a bearish indicator. Hence, we recommend a “Sell” rating on the CCL.B share at the closing price of CAD 66.62 (as on December 24, 2021).

1-year price chart (as on December 24, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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