Cello World: Robust growth outlook

16 Feb 2024 , 10:41 AM

Analysts of IIFL Capital Services met with the management of Cello World at IIFL’s 15th Enterprising Bharat – Global Investors’ Conference in Mumbai. The company stated that in medium term, it is not looking to extend into a new product category but to focus on and scale up the existing ones. On the back of a well-diversified portfolio, shift of consumer preference towards branded products and the strong brand power that Cello commands, the management is optimistic about the growth trajectory of different segments and the company as a whole. 

Well placed for growth in consumerware: 

The glassware facility being set-up at Rajasthan is expected to be commissisoned in March’24 and when at peak capacity is expected to generate a revenue of ~Rs2.5bn. The management stated that there is a large headroom for growth in the consumerware segment on the back of: i) shift in buyer preference from ubranded to branded products, ii) expansion into rural markets (currently only ~40% of the consumerware sales is from rural markets) and iii) setting up of glassware facility provides a big opportunity in the domestic markets (import substitution by domestic companies) as well as international markets (exports). 

Aim to grow writing instruments and stationery business volumes by ~20-25%: 

The management stated their aim of growing the volumes in writing instruments and stationery business by ~20-25%. The Cello brand is priced at a mass-premium and the company enjoys higher margins than its category peers on the back of its pricing decisions (not selling at a low price point of Rs5/-). The current retail distribution reach stands at 0.12mn outlets and the company aims to increase it to about 0.3mn outlets in the span of 1- 1.5 years. 

Moulded furniture to remain subdued: 

The moulded furniture has been facing muted growth and the management stated that the mass-end segment is expected to remain flat. Cello is looking for adding more value-added products in the moulded furniture segment and premiumising these value added products. The moulded furniture and allied products category as a whole currently contribute ~15-18% of the sales for Cello and the management believes that this segment will grow by ~10% on the back of launch of value added products and premiumisation.