Buy Cello World; target of Rs 1050: ICICI Securities

ICICI Securities's research report on Cello World

Cello reported modest revenue growth of 6.1% YoY (in-line with industry’s growth rate) amid weak consumer demand. Gross margin scaled up to 53.8%, led by better product mix and thrust on value-added premium products. It has sharply increased brand investments in Q1. We note this may aid Cello in gaining market shares. The company guides for 15– 17% revenue growth in FY25 (despite soft Q1), implying a sharp demand revival in H2FY25. We believe the upcoming festive season may offer early signs of a demand upswing. Apart from demand revival, we believe production rampup at its glassware plant, expansion of opalware unit and price-led growth may aid in attaining guided revenue growth in FY25. Maintain BUY.

Outlook

We model Cello to report revenue and PAT CAGRs of 15.7% and 18.4%, respectively, over FY24-26E. We also model RoCE to be >20% over FY24–26E. We maintain BUY on Cello with a DCF-based revised target price of INR 1,050 (earlier: INR 1,060; implied P/E of 48x FY26E).