Cello World shares: This recent D-St debutant attract brokerage interest; analysts up to 37% upside

Cello World Ltd, on the recent debutants of Dalal Street, has drawn attention of analysts as it has seen coverage initiations by number of brokerage firms including- Motilal Oswal Financial Services, Kotak Institutional Equities and Monarch Networth Capital- who are majorly positive on the company and see up to 37 upside in the stock.

Analysts, which have developed new interest in Cello World are positive on the stock on the back of strong pan-India brand, expansion plans, diverse categories of products, sound track record, faster growth than industry and rising demand among the consumers.

However, the analysts see volatility in key raw material prices; dependence on third-party manufacturers; and intensified competition as key downside risks for the company.

Cello World's diversified portfolio with over 15,000 SKUs and nimbleness in rolling out new products and designs; track record of scaling up new businesses on the back of its brand strength, pan-India distribution network, manufacturing capabilities and an experienced team; and financial discipline and industry-leading profitability set it apart, said Kotak Institutional Equities.

"Cello World is a leading consumerware company with a wide range of products spanning consumerware, stationery and moulded furniture. We estimate revenue, Ebitda and PAT to grow at 15 per cent, 18 per cent and 17 per cent CAGR , respectively over FY2024-27E. We initiate coverage with an 'add' rating and a fair value of Rs 950 on the stock," it added.

To recall, shares of Cello World Ltd were listed at the bourses in November 2023, about 4 months ago, when the company raised a total of Rs 1,900 crore via IPO, which was entirely an offer-for-sale (OFS) of up to 2.93 crore equity shares. The company had fixed its price band in the range of Rs 617-648 with a lot size of 23 shares.

The stock had settled at Rs 805 on Wednesday and has gained about 25 per cent from issue price of Rs 648. The stock had tested highs of Rs 949.30 on February 28, 2024. Kotak expects stock to reclaim those levels in the coming months in its IC report.

Cello excels in manufacturing a diverse range of products while maintaining optimal inventory levels, enabling it to aggressively expand existing SKUs and venture into new businesses, said Motilal Oswal. "We believe that the company will be able to successfully scale up new businesses, and expand SKUs as well as distribution reach to evolve as a leading brand," it said.

"Operating in diverse industries, Cello benefits from an expanding TAM driven by various sector tailwinds, including favorable demographics, increased discretionary spending, greater product penetration, import substitution, innovation, evolving gifting trends, and brand loyalty. Cello is currently trading at 35 times FY26E P/E," it added with a 'buy' tag with a target price of Rs 1,100.

Cello World has 13 manufacturing units situated in 5 different locations in India. The company also aims to set up a glass manufacturing unit in Rajasthan with European-made machinery to enable efficient productivity and enhanced manufacturing capacity.

The brand's dominance is underpinned by judicious management decisions, strategic expansion, and a product line tailored to diverse consumer needs. Noteworthy is the company's commitment to in-house manufacturing, mitigating supply issues, and a diverse product basket that insulates it from industry fluctuations, said Monarch Networth in its IC note.

"Hence its premium valuation is justified and can sustain owing to brand power, an extensive product portfolio, and the management team’s acumen in navigating the market landscape. We initiate coverage on Cello World, with a target price of Rs 1,100," it added, suggesting an upside of 37 per cent from its previous close.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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