ICICI Securities bullish on this consumer ware stock as demand pickup, other tailwinds to help achieve guided revenue growth in FY25
After decent gains since listing, shares of the company may offer potential gains to investors as there is expected demand recovery in the upcoming festive season.
After over 36 per cent gains since listing in November last year, Cell World is seen to deliver still higher returns as domestic brokerage ICICI Securities maintain a buy view on the stock for further gains of 19 per cent, setting a target at Rs 1,050.
The consumer ware stock made its stock market debut at a price of Rs 831 as against the IPO issue price of Rs 648 apiece. And now as the festivities are set to begin, the brokerage maintains that after the soft Q1, the upcoming festive season may offer early signs of a demand upswing.
Cello World's Q1 numbers
The company during Q1 reported modest revenue growth of 6.1% per cent (in-line with industry’s growth rate) amid weak consumer demand. The gross margin scaled up to 53.8 per cent, led by better product mix and thrust on value-added premium products. Also, as the company has strengthed its investments in brand, it is seen to help the company in gaining market share. The company guides for 15–17 per cent revenue growth in FY25 (despite soft Q1), implying a sharp demand revival in H2FY25.
The company's revenue/EBITDA/PAT growth was recorded at 6.1 per cent, 8.5 per cent and 6.9 per cent YoY, respectively. EBITDA margin expanded 55bps YoY to 25.8 per cent led by operational efficiencies.
Better H2FY25 may aid achieving guided revenue growth in FY25
Even after soft revenue growth in Q1, the company has sustained its 15-17 per cent revenue growth guidance for the current fiscal year. We expect the consumerware and writing instrument segment to post healthy growth led by demand revival and distribution network expansion. Also, the benefits of capacity expansion in glassware and opalware may start reflecting in H2FY25, and this may aid in generating incremental
revenue growth, added the brokerage.
Valuation and key risks
The brokerage expects the company to report revenue and PAT CAGRs of 15.7 per cent and 18.4 per cent, respectively,over FY24-26E. The brokerage also models the company's RoCE or return on capital employed to be more than 20 per cent over FY24–26E. Key risks for the upside are increase in competitive pressure, teep increase in raw material prices; and failure of key new product launches.
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