Buy Cello World; target of Rs 800: Motilal Oswal

BUY

Motilal Oswal's research report on Cello World

CELLO reported ~5% revenue growth in 3QFY25, driven by festive demand in the first half of the quarter. However, this was offset by a slowdown in consumption and discretionary spending later in the quarter. Growth in Consumerware (up 9% YoY) and Moulded Furniture & Allied products (up 7% YoY) was partially impacted by a decline in the Writing Instrument segment (down 11% YoY), despite export markets showing sequential recovery. Despite short-term headwinds, the company anticipates a rebound in consumption-driven demand due to the revised income tax policies in the new budget and untapped growth potential in quick commerce (currently ~1.5%-2.0% of e-commerce sales)

Outlook

Factoring in the weak 3Q performance, we cut our FY25/FY26/FY27 EPS estimates by 6%/19%/11% due to a delay in the ramp-up of Glassware and lowering revenue and margin for Writing Instrument caused by subdued export demand. We reiterate our Buy rating with a TP of INR800 (premised on 34x FY27E EPS).

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