Cello World (CLW) Stock Soars 4% Following Board Approval for QIP Fundraising

• Cello World shares jumped over 4.59 per cent on Wednesday, May 29, after the company initiated a share placement for qualified institutional buyers on May 29.
• The company plans to raise funds by issuing 8.654 million equity shares, each with a face value of ₹5.
• “Cello guides for 15-17 per cent revenue growth for FY25. We broadly maintain our FY24-26 estimates for Cello with Mar’25 TP of INR 940. We maintain BUY rating,” said brokerage firm JM Financial.

Cello World shares surged 4.59% after announcing a Qualified Institutional Placement (QIP) to raise funds. Read on for detailed insights and future projections.

Cello World Shares Surge Following QIP Announcement

On Wednesday, May 29, Cello World shares saw a significant uptick of 4.59% following the company’s announcement of a Qualified Institutional Placement (QIP). The company plans to issue 8.654 million equity shares, each with a face value of ₹5, to raise funds. At 12:30 pm, the stock was trading at ₹886.90 per share, up from its previous close of ₹860.10.

Fourth-Quarter Performance Exceeds Expectations

Cello World’s fourth-quarter performance exceeded market expectations, with revenue growing by 11% year-on-year to ₹2,000 crore. This growth was driven by a 12% annual increase in consumer ware, a 12% annual increase in writing instruments, and a 3% annual increase in molded furniture. The company has projected a revenue growth of 15-17% for the financial year 2025.

Brokerage Firm’s Perspective

Brokerage firm JM Financial has maintained its FY2024-26 estimates for Cello World, projecting a target price of ₹940 by March 2025. “Cello guides for 15-17 per cent revenue growth for FY25. We broadly maintain our FY24-26 estimates for Cello with Mar’25 TP of INR 940. We maintain BUY rating,” the firm noted. The firm appreciates Cello’s diversified product range, strong branding, extensive distribution network, and exceptional earnings growth and return profile.

Risks and Challenges

Despite the positive outlook, the brokerage firm identified key risks such as significant fluctuations in polypropylene prices and potential changes in brand licensing agreements. While demand was weak in January and February 2024, it began to pick up pace starting in March 2024. However, it slowed down again in May 2024 due to the general elections.

Conclusion

Cello World’s recent QIP announcement and strong fourth-quarter performance have positively impacted its stock price. With a projected revenue growth of 15-17% for FY25 and a BUY rating from JM Financial, the company’s future looks promising. However, investors should remain cautious of potential risks such as fluctuations in polypropylene prices and changes in brand licensing agreements.