Churchill China PLC 

Churchill China PLC (LSE: CHH) is a UK-based company listed on the FTSE AIM All-Share index, specializing in high-performance ceramics for the global hospitality sector. It provides tableware and related products to a wide range of clients, including restaurants, pubs, hotel chains, sports and conference venues, educational institutions, and contract caterers. Additionally, the company manufactures and sources products for retail customers, offering home-use ceramics across various international markets. This Report covers the Key Recommendation Rationale, Conclusion, and Recommendation on the stock.

Key Recommendation Rationale – Sell at GBX 500.00

• Revenue declined by 4.9% year-on-year to GBP 78.3 mn (FY23: GBP 82.3 mn): The decline was primarily attributed to weaker demand in key markets and a reduction in new installations, particularly in Europe during Q4 2024.

• Profit before tax fell 20.9% to GBP 8.5 mn (FY23: GBP 10.8 mn): Lower sales volumes and a challenging pricing environment impacted margins, with the return on sales decreasing to 10.9% from 13.1% in 2023.

• EBITDA declined 15.2% to GBP 11.7 mm (FY23 GBP 13.8 mn): Despite operational efficiency gains, the decrease reflects the overall contraction in sales and limited ability to pass on rising costs fully to customers.

• Cash and cash equivalents decreased by GBP 3.8 mn to GBP 10.1 mn (FY23: GBP 13.9 mn): This was mainly due to a working capital outflow including increased inventory of GBP 1.4m and higher trade receivables of GBP 1.2m, along with GBP 4.0m in dividends paid

• Materials segment revenue dropped by GBP 1.6 mn to GBP 13.1 mn (FY23 GBP 14.7 mn): This decline was driven by weaker demand in the retail ceramics market, especially in Q4, where many customers operated on reduced working hours, affecting Furlong Mills' profitability.

• Macroeconomic Risk: The market sentiments can remain weak in the short term due to the subdued consumer disposable income, geopolitical tensions, and political risks.

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

Conclusion

CHH is expected to trade at a discount, considering the recent decline in profit before tax GBP 8.5 mn, fall in cash and cash equivalents, also revenue declined in FY24, economic slowdown, etc. For conducting the valuation, the following peers have been considered: Barratt Redrow PLC (LSE: BTRW), Bellway PLC (LSE: BWY), etc.

Given its current trading levels, decline in Quarterly Revenue, reliance on Select Product Categories, relative valuation, and associated risks, it is prudent to exit the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the Current Market Price of GBX 500.00 as of 09 April 2025, 09:45 AM, GMT+1. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 09 April 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.