Prabhudas Lilladher Initiates Coverage on Cello World with a Target Price of Rs 489
Cello World's Q4FY26 Performance: Key Growth Drivers Emerge Amid Supply Constraints
Cello World's research report by Prabhudas Lilladher highlights the company's Q4FY26 performance, with Consumerware accounting for 66.4% of revenue. The Hydration sub-segment remained subdued due to continued steel bottle supply constraints. However, Glassware and Opalware delivered steady growth, driven by slow consumer demand. Glassware plant utilization improved marginally to approximately 60%, but profitability remained at breakeven due to the dumping of imported Chinese glassware products.
Writing Instruments, on the other hand, grew strongly by 64% YoY, driven by the addition of the Cello stationery brand and contribution from premium product launches. The management reiterated its target of reaching INR5.0bn+ Writing Instruments revenue in FY27. EBITDA margin remained under pressure due to low glassware utilization, higher steelware sourcing costs from OEMs, product discounting, and an unfavorable product mix. However, scale benefits in Writing Instruments partly offset these pressures.
The company's management highlighted Glassware and Writing Instruments as key growth drivers for FY27. Despite low glassware utilization at approximately 60%, the company is focusing on scaling volumes and improving profitability. Writing Instruments is expected to benefit from the Cello stationery brand integration and product mix improvement. Notably, the company has commissioned 2 steel bottle manufacturing lines during Q4FY26 and another 4 lines in Q1FY27, with full capacity ramp-up expected from July 26.
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Outlook and Recommendations
We estimate revenue/EBITDA/PAT CAGR of 8.6%/11.2%/9.9% for FY26-28E. However, we have downward revised FY27/FY28 earning estimates by 10.2%/11.3% factoring in supply constraints in the steel category and underutilization of the glassware plant continuing for a couple of quarters. We assign a SOTP-based target price of INR489 (earlier INR621), implying a PE of 27x FY28E. Maintain 'BUY' recommendation.
| FY27E | Original Estimate | Downward Revised Estimate | Percentage Change |
|---|---|---|---|
| Revenue | -10.2% | ||
| EBITDA | -11.3% | ||
| PAT | -10.2% |
Note: The table above represents the downward revised estimates for FY27E. The original estimates are not provided in the original text.
Investor Takeaway
Investors should monitor Cello World's performance in the Hydration sub-segment and Writing Instruments segment.
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