Buy Cello World; target of Rs 1100: Motilal Oswal

Motilal Oswal's research report on Cello World

Cello World Limited (Cello) is a household brand with presence across categories, such as consumer houseware (FY23 contribution: 66%); writing instruments & stationery (16%); and moulded furniture & allied products (18%). The company has over six decades of experience in scaling up new businesses and carving out leaders among them. Cello has a strong pan-India brand recall supported by its diverse product portfolio (~15,841 SKUs) and deep distribution network (3,300+ distributors and 1,26,000+ retailers), which help it expand its existing product categories and scale up new product categories quickly (launched Glassware in 2017, and Writing Instruments in 2019). Cello’s expansion of its SKUs is facilitated by its robust manufacturing capability (~79% in-house manufacturing), with 13 plants spread across five locations. In response to the growing demand and to minimize reliance on glassware imports, Cello is building a new glassware plant of 20,000MTPA at Falna, Rajasthan. Further, the company is expanding its opalware capacity by 10,000MTPA at Daman, thereby enhancing the company's self-sufficiency in production.

Outlook

Cello is currently trading at 35x FY26E P/E with an RoE/RoCE of 32%/39% in FY26E. We initiate coverage on the stock with a BUY rating and a TP of INR1,100 (premised on 45x FY26E P/E).

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Cello World - 2722024 - moti