Cello World Faces Sell Call From Investec, Margin Pressure And Valuation Risks Highlighted
The brokerage noted that scaling the glassware segment also could prove challenging given competitive intensity.
Cello World Ltd. has come under a bearish lens as Investec initiates coverage with a 'Sell' rating and a target price of Rs 530.
The brokerage highlighted that,
Sizeable 30% portfolio is exposed to adverse near-term macro headwinds
This puts both growth and Ebitda margins at risk
Scaling the glassware segment also could prove challenging given competitive intensity
This would cap Ebitda margin at 25% versus 30-35% management guidance
This will stretch payback periods and leaving RoCE broadly in line with cost of capital
See room for further consensus downgrades
Valuation doesn’t look attractive either
Cello World reported a 5% year-on-year rise in consolidated net profit at Rs 85.7 crore for the second quarter of FY26, driven by strong topline growth. Revenue from operations surged 20% to Rs 587.4 crore compared to Rs 489.5 crore in the same period last year.
Consumer Ware continued to lead the pack with revenue of Rs 422.2 crore, marking a 23% increase over last year. Writing Instruments contributed Rs 81 crore, up 16% year-on-year, while Moulded Furniture and Allied Products posted Rs 84.3 crore, registering an 8% growth.
Operating performance showed modest improvement, with Ebitda rising 7% to Rs 141.3 crore from Rs 131.9 crore in second quarter of FY25. However, margins narrowed to 24% from 26.9% a year ago.
Cello commenced operations in 1982 and has a diversified product range and brand portfolio with products in the glassware, opalware, melamine and porcelain categories.
The company operates 13 manufacturing facilities across five locations in India. The company is in the process of setting up a new Glassware manufacturing facility in Rajasthan, which is expected to house European-made machinery that enables high productivity and precision in design finish, the company said on its website.
