Cello World shares slipped over 2% in early trade after global brokerage Investec initiated coverage on the stock with a ‘Sell’ rating and set a target price of ₹530, citing near-term macro risks, margin pressures, and an unattractive valuation outlook.
The brokerage flagged that nearly 30% of Cello World’s portfolio—including opalware, vacuum flasks, and stationery exports to the US—is exposed to unfavourable macroeconomic headwinds. According to Investec, these challenges could weigh on both revenue growth and EBITDA margins in the near to medium term, limiting earnings visibility.
Investec also raised concerns around the company’s glassware segment, noting that scaling up in this category may prove difficult due to intense competition. The brokerage believes this could cap EBITDA margins at around 25%, well below the 30–35% margin guidance shared by the management. Lower-than-expected margins may stretch payback periods on investments and keep return on capital employed (RoCE) broadly aligned with the cost of capital, rather than delivering meaningful value creation.
Reflecting these risks, Investec has cut its FY28 EBITDA and PAT estimates by 26% and 22%, respectively, compared to consensus forecasts. The brokerage further indicated that there may be additional downside to consensus earnings estimates, suggesting that the market may not have fully factored in the evolving headwinds.
On valuation, Investec said Cello World does not appear compelling at current levels. The stock is trading at around 32x FY28E price-to-earnings, based on Investec’s estimates, which is only marginally below its two-year average multiple of 34x, despite the rising risks to growth and profitability.
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