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Business News/ Markets / Cello World share price sheds over 8% in two sessions post Q4 results. Should you buy, sell or accumulate?

Cello World share price sheds over 8% in two sessions post Q4 results. Should you buy, sell or accumulate?

Cello World's share price fell 8% after Q4 results. FY24 revenues increased by 11.3% YoY. Management predicts rural demand growth in CY24, with revenue expected to rise by 15-17%. Brokerages maintain 'BUY' rating with a target price of ₹1,090, anticipating revenue and EBITDA growth in FY25-26.

Cello World share price opened at ₹875 apiece on BSE; the stock touched an intraday low of ₹842.05 and an intraday high of ₹881.40.Premium
Cello World share price opened at 875 apiece on BSE; the stock touched an intraday low of 842.05 and an intraday high of 881.40.

Cello World share price has slumped over 8% in the last two trading sessions following the company's Q4 results. Cello World's revenue for the quarter ended March (Q4FY24) was 512.5 crore. The company's revenues for FY24 increased to 2,000.3 crore, an 11.3% YoY rise. The consumer goods, writing instrument, and molded furniture businesses reported quarterly revenues of 327 crore, 87.6 crore, and 97.9 crore, respectively.

Revenue increased by 12.2%, 16.9%, and 3.5% in FY24 for the consumerware, writing instruments, and molded furniture businesses, respectively. For consumer goods, the quarter-over-quarter volume rise was 7-8%; for writing instruments, it was 11%; and for molded furniture, it was 18%.

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Moving forward, the management anticipates a significant increase in rural demand due to an improved monsoon prediction for CY24.

Lead by a 15–17% increase in volume, the management directs a 15–17% increase in income. With a quicker ramp-up of the glassware capacity and an improved pricing condition, revenue growth might reach 20%. In FY25, EBITDA margins should be stable between 24 -26%. Houseware sales are predicted to increase by 15%, while income from consumer glassware would only reach around 460–475 crore in FY25.

Also Read: Sumitomo Chemical stock jumps over 9% to 52-week high as profit jumps 52% in Q4

The firm has said that it would be raising funds through fundraising to pay off debt (including loans from promoters), increase glassware production, and make inorganic acquisitions within its current markets.

On Tuesday, Cello World share price opened at 875 apiece on BSE; the stock touched an intraday low of 842.05 and an intraday high of 881.40. Since Cello World's debut in November 2023, the stock has gained about 30% so far. 

Here's what brokerages say

Motilal Oswal Financial Services

The brokerage in its report stated that it maintains its FY25/FY26 EPS estimates and retains ‘BUY’ rating on the stock with a target price of 1,090. The brokerage house sees an potential upside of 25%.

"Operating in diverse industries, Cello World benefits from an expanding TAM, driven by various sector-specific tailwinds, including favourable demographics, increased discretionary spending, greater product penetration, import substitution, innovation, evolving gifting trends, and brand loyalty. We estimate Cello World to grow faster than the industry.

The company is expected to post a robust CAGR of 19%/24%/24% in revenue/EBITDA/adj. PAT over FY25-26. This will be driven by the expansion of both SKUs and distribution reach, coupled with strong growth in the glassware segment after the ramp-up of the new plant in Rajasthan," the brokerage said.

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Monarch Networth Capital 

As a result of lower-than-expected revenue growth, the brokerage firm has lowered its recommendation to Accumulate (Buy) and set a target price of 1,000 ( 1,100). It has also adjusted its profits forecast downward by 6%. Because business relationships affect year-over-year comparisons, the company's quarterly results are now not comparable. 

On a yearly basis, however, Cello reported respectable results, with a noteworthy rise in total profitability fueled by favourable raw material costs and improved productivity in writing instruments and Opalware. The company's consumer glassware business is the main driver of its mid-double-digit growth expectation. The expanding popularity of glassware goods in the nation supports long-term growth prospects, which are further enhanced by the planned opening of a new glassware factory in H1FY25.

"We believe Cello is well-positioned to capitalise on the ongoing premiumisation trend, offering a range of products that reflect increasing consumer demand. Additionally, Cello's high brand recall and astute management provide further confidence in its sustained growth potential.

We expect the company to post revenue growth of 15.2% over FY24-FY26E, while EBITDA is likely to grow at 16.4% over the same period. Margins should improve by 81bps over the same period to 26.3%. PAT should grow at CAGR of 16.8% over the same period," the brokerage said.

Also Read: Krystal Integrated share price jumps over 5% on strong Q4 results led by robust order book

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.


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Published: 28 May 2024, 12:59 PM IST
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