Buy Cello World Ltd For Target Rs. 768 - LKP Securities
Cello World Ltd (CWL) is a diversified Consumer Durables player with presence across Consumer Houseware (68.4%), Writing Instruments (14.4%), and Moulded Furniture (17.2%). Backed by the legacy “Cello” brand, the company has scaled premium segments like opalware, glassware, and stainless steel drinkware, supported by 77% in-house manufacturing and a 1.5 lakh+ outlet network. Key growth drivers include capacity scale-up in high-margin categories like opalware and glassware (targeting full utilization by FY27), strategic entry into steelware amid import bans, and gradual recovery in the writing instruments segment. Despite nearterm demand fluctuations, the company’s fundamentals remain strong with ~24-26% EBITDA margin, 77% in-house manufacturing, and reach across 1.5L+ outlets. We forecast 14%/16%/15% revenue growth over FY25–27E and RoE/RoCE of 17%/18%, supported by average annual operating cash flows of Rs.2.4 bn. We initiate coverage with a BUY rating and a target price of ?768, valuing the stock at 35x FY27E EPS of Rs.21.9.
Harnessing Industry growth with accelerating branded penetration
CWL operates in a large and expanding Rs.743 bn+ addressable market, growing at ~9% CAGR over FY15–23 across consumerware, glassware, writing instruments, and moulded furniture. With the branded segment rising to 68% in FY25 (from 60% in FY20), India is witnessing a formalisation shift driven by consumer demand for quality, safety, and design consistency. CWL, with a sub-3% market share, is well-positioned to gain share via its strong brand equity, omni-channel reach, and in-house manufacturing. Continued investments in localisation, premiumisation, and distribution expansion reinforce its position as a key beneficiary of the shift towards branded, organised consumption.
Premiumisation and regulatory tailwinds
CWL’s shift into higher-value categories like opalware and borosilicate glassware is already yielding results, with combined revenues reaching Rs.3.9 bn in FY25, growing at 15% YoY. These segments enjoy higher ASPs and better gross margins. The company is also wellpositioned to benefit from the BIS (Bureau of Indian Standards) regulation rollout, which is disrupting low-quality imports—especially in stainless steel vacuum bottles. As enforcement tightens, organised players like CWL stand to gain share through import substitution, premium positioning, and compliance-driven brand trust.
Distribution expansion: Enabling scalable, multi-channel growth.
CWL’s distribution has seen a significant upgrade, expanding from 717 distributors and 59,000 outlets in FY23 to over 4,000 distributors and 1.5 lakh retail points in FY25. This strong network underpins rapid scale-up across categories, especially in Consumerware and Writing Instruments, where “Unomax” volumes doubled between FY21 and FY23.
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