Shares of household products and stationery manufacturer Cello World climbed as much as 7% on Thursday to Rs 602.35 on the BSE after brokerage Kotak Institutional Equities upgraded the stock to a "buy" rating citing easing inventory concerns, a ramp-up in the company’s new glassware unit, and potential recovery in revenue growth.
The stock has lost 35% over the past six months amid weak growth trends, delays in the commissioning of its glass furnace, and margin pressure from higher discounts. However, the brokerage said the recent correction was overdone and sees scope for upside as the company navigates through these headwinds.
Kotak Institutional Equities revised its target price on the stock to Rs 710 from Rs 815 earlier, still implying a potential upside of 17.9% from the current market price.
Cello World shares have declined 31% in the past year and are down 13.4% over the last three months. However, the stock has rebounded nearly 9% in the last month and 13% in the past week.
Kotak Equities trimmed its FY2026-27 earnings estimates for the company by 5-6%, projecting a 12% EPS CAGR over FY2025-27, compared with 16% earlier. The brokerage flagged concerns over continued weakness in houseware and writing instruments, and heightened competition in the opalware segment following Milton’s expected entry after Diwali.
The brokerage noted that management has guided for 12-14% revenue growth in FY2026, supported by Rs 1 billion in incremental revenue from the new glassware plant.
The unit is currently operating at 50% capacity and is expected to reach 70% utilisation over the next few months. While the furnace is likely to be loss-making early on, Cello expects EBIT break-even in FY2026 after accounting for depreciation of Rs 200-220 million.
Margins are expected to be impacted by 50-100 basis points in FY2026 due to the ramp-up, Kotak said. However, by FY2027, glassware EBIT margins are projected to reach 25%. Cello aims to scale up revenue from its new unit to Rs 2.5 billion by FY2027.
In opalware, where Cello and Borosil have gained share, the market is expected to see intensified competition. Milton’s capacity addition of Rs 1.5-1.7 billion could weigh on realizations, though the brokerage said it believes higher volumes will support mid-teens value growth in the segment.
Cello’s writing instruments business has seen sluggish growth, hurt by weak domestic demand and export challenges. The company is expanding into new categories like crayons and art supplies, and expects double-digit growth as consumption recovers.
In houseware, Cello has begun manufacturing steel flasks locally, shifting from imports due to BIS regulations, the brokerage noted. Though SKU limitations and quality issues pose near-term challenges, Kotak said the company expects this shift to double its steelware business from the current Rs 3 billion level.
Management is also reallocating marketing spends towards digital and below-the-line campaigns, particularly in emerging channels such as e-commerce and quick commerce. The brokerage noted that Cello is undertaking operational changes aimed at reducing receivable days, improving distribution efficiency, and optimizing its plastic product portfolio.
On the technical front, Cello World is trading below its 100-day, 150-day, and 200-day simple moving averages. The 14-day Relative Strength Index stands at 53.9, suggesting neutral momentum.
Also read | ICICI Securities maintains Buy on Cello World, lowers target price to Rs 800
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
The stock has lost 35% over the past six months amid weak growth trends, delays in the commissioning of its glass furnace, and margin pressure from higher discounts. However, the brokerage said the recent correction was overdone and sees scope for upside as the company navigates through these headwinds.
Kotak Institutional Equities revised its target price on the stock to Rs 710 from Rs 815 earlier, still implying a potential upside of 17.9% from the current market price.
Cello World shares have declined 31% in the past year and are down 13.4% over the last three months. However, the stock has rebounded nearly 9% in the last month and 13% in the past week.
Kotak Equities trimmed its FY2026-27 earnings estimates for the company by 5-6%, projecting a 12% EPS CAGR over FY2025-27, compared with 16% earlier. The brokerage flagged concerns over continued weakness in houseware and writing instruments, and heightened competition in the opalware segment following Milton’s expected entry after Diwali.
The brokerage noted that management has guided for 12-14% revenue growth in FY2026, supported by Rs 1 billion in incremental revenue from the new glassware plant.
The unit is currently operating at 50% capacity and is expected to reach 70% utilisation over the next few months. While the furnace is likely to be loss-making early on, Cello expects EBIT break-even in FY2026 after accounting for depreciation of Rs 200-220 million.
Margins are expected to be impacted by 50-100 basis points in FY2026 due to the ramp-up, Kotak said. However, by FY2027, glassware EBIT margins are projected to reach 25%. Cello aims to scale up revenue from its new unit to Rs 2.5 billion by FY2027.
In opalware, where Cello and Borosil have gained share, the market is expected to see intensified competition. Milton’s capacity addition of Rs 1.5-1.7 billion could weigh on realizations, though the brokerage said it believes higher volumes will support mid-teens value growth in the segment.
Cello’s writing instruments business has seen sluggish growth, hurt by weak domestic demand and export challenges. The company is expanding into new categories like crayons and art supplies, and expects double-digit growth as consumption recovers.
In houseware, Cello has begun manufacturing steel flasks locally, shifting from imports due to BIS regulations, the brokerage noted. Though SKU limitations and quality issues pose near-term challenges, Kotak said the company expects this shift to double its steelware business from the current Rs 3 billion level.
Management is also reallocating marketing spends towards digital and below-the-line campaigns, particularly in emerging channels such as e-commerce and quick commerce. The brokerage noted that Cello is undertaking operational changes aimed at reducing receivable days, improving distribution efficiency, and optimizing its plastic product portfolio.
On the technical front, Cello World is trading below its 100-day, 150-day, and 200-day simple moving averages. The 14-day Relative Strength Index stands at 53.9, suggesting neutral momentum.
Also read | ICICI Securities maintains Buy on Cello World, lowers target price to Rs 800
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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