Cello World shares climbed 4% today; Motilal says 'Buy' stock, suggests price target

Shares of recent debutant Cello World climbed over 4 per cent in Tuesday's trade after the domestic brokerage Motilal Oswal Securities maintained its 'Buy' rating on the stock with a target of Rs 1,100, suggesting a 34 per cent potential upside over Monday's closing price.

Following the development, the stock rose 4.45 per cent to hit a high of Rs 860 on BSE.

Cello World has been one of the leading players across its product categories, boasting a strong brand reputation and distribution reach, Motilal Oswal said. With its strong manufacturing background and brand equity, CELLO has been able to quickly scale up new businesses and compete with market leaders, it added.

"The consumer glassware segment will be a key growth segment for the company and we believe CELLO will be able to surpass the market leader in the segment on back of operationalisation of its new glassware capacity. We estimate Cello World to deliver a CAGR of 18 per cent/23 per cent/25 per cent in revenue/Ebitda/adjusted PAT over FY23-26," Motilal Oswal said.

At present, Cello is trading at 34 times estimated FY26 EPS with estimated RoE of 32 per cent and ROCE of 39 per cent in FY26E. Motilal's target price for Cello World is based on 45 times FY26E EPS.

Since Cello World's foray into the consumer glassware segment in 2017, the company has quickly scaled up this business to generate revenue of Rs 280 crore against a total addressable market (TAM) of Rs 3,500 crore in FY23. The segment will be a key growth driver (26 per cent CAGR over FY23-26) for the company amid evolving applications, capacity expansions in opalware and soda lime glassware, increase in SKUs, and import substitution, Motilal Oswal said.

"Under the consumer glassware segment, opalware/soda lime glassware dominate, with TAM of Rs 1,400 crore/Rs 1,500 crore. While La Opala dominates the opalware category, Cello is also catching up with recent capacity expansions in Daman. Moreover, Cello is the only large branded player that is expanding in soda lime glassware (higher TAM), while other players are expanding in borosilicate glassware (TAM of Rs 400 crore)," it said.