Ladies and gentlemen, good day, and welcome to the Cello World Limited Q1 FY 2025 Earnings Conference Call, hosted by ICICI Securities Limited. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I will hand the conference over to Mr. Nilesh Patil from ICICI Securities Limited. Thank you, and over to you, sir.
Thanks, Neha. On behalf of ICICI Securities, we welcome you all to Q1 FY 2025 results conference call of Cello World Limited. We have with us Mr. Gaurav Rathod, Joint Managing Director, and Mr. Atul Parolia, Chief Financial Officer. Now I hand over the call to management team for their initial comments on the quarterly performance, and then we will open the floor for question and answer session. Thanks, and over to you, sir.
Good morning, everyone. This is Gaurav Rathod, Joint Managing Director. Along with me is our company Group CFO, Mr. Atul Parolia. The results and presentations are available on the stock exchange and on our website. I hope you had a chance to look at it. Our performance during Q1 financial year 2025 is in line with industry trends. We have grown our revenue by 6.1% on a year-on-year basis and were able to improve gross profit margins from 52.6%- 53.8% year-on-year, an increase of 120 basis points. I would like to highlight that this growth was achieved despite facing multiple headwinds on the demand front, including weak urban demand during the quarter and an increasingly challenging environment due to the elections.
That said, we are optimistic about the rest of the year, and the demand seems to be improving. Improvement in our top line was primarily driven by the Consumerware and the Molded Furniture businesses, which grew at 6% respectively, while the Writing Instruments remained flattish due to the continued sluggishness in the overall demand scenario. Having said that, we remain confident about the Writing Instruments business. The growth in the Writing Instruments business is a function of our footprint expansion alongside additions to our product portfolio. In the rest of the year, we will be adding product lines like markers, crayons, and geometry boxes, which will help us penetrate and expand in the market. On the margins front, while the overall operating margins remained stable, we saw an uptick in the gross margin profile.
This improvement is a result because of the shift in the product mix and revenue mix changed primarily due to this reason. Our Consumerware business recorded a 170 basis point improvement in gross margin on a year-on-year basis, followed by Molded Furniture & Allied Products, which grew by around 100 basis points year-on-year, largely due to lower raw material costs. Writing Instruments, which already have higher gross margins in our product basket, saw 80% gross margin expansion on a year-on-year basis. I would like to highlight that in Q1, we ran a back-to-school advertising campaign. That resulted in an increase in our advertisement expenses from INR 2.8 crore in FY 2024 to INR 7.8 crore in Q1 of FY 2025.
Such activities are important in order to enhance the brand's recall and salience, and we will continue to do so for the rest of the year too. To end with, we expect the second half of this financial year to be stronger, driven by an improvement in the overall demand scenario throughout all our business verticals. We continue to maintain our growth expectations of about 15%-17% in FY 2025. With this, I would like to hand over to our CFO, Mr. Atul Parolia, for the financial highlights. Thank you.
Thank you very much, Gaurav, and good morning to everyone. I now will be sharing financial details for the quarter gone by. In Q1 FY 2025, we achieved a revenue of INR 501 crore and EBITDA of INR 135 crore with a healthy EBITDA margin of 27% and growth of 8.6% year-on-year. Our PAT stood in at INR 83 crore with a margin of 16.5% and growth of 6.7%. Speaking about the business vertical, over 65% of revenue came from the Consumerware, 17% from Writing Instruments, and remaining 18% from the Molded Furniture & Allied Products. Overall, around 81% of revenue came from the in-house manufacturing.
As Gaurav highlighted in the opening remarks, we saw an increase of around 150 basis points in our gross margin, which stood at INR 269 crore. Consumerware gross profit margin was 55%, Writing Instruments margin was 59.3%, and Molded Furniture was 45.6%. In terms of channel mix, general trade contributed 74% of our sale, while export and online sale contributed approximately 10% each. Remaining 6% was contributed by the modern retail. With this, I would like to open the session for question and answers.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jay Doshi from Kotak Securities. Please go ahead.
Yeah. Hi, good morning, and thanks for the opportunity. My first question is 15%-17% top-line growth a guidance, or is it an aspiration? Because if I were to look at 6% growth in the first quarter, it implies you are indicating at 19%, 20% growth for rest of the year. If you can help us with the math, how much of this 19%, 20% growth in the remaining three quarters will come from the soon-to-be-commissioned glassware plant, and how much of it from the base business, rest of the business?
So I think it's not an aspiration. It's something that we believe that we will be able to achieve. As you rightly said, due to the commissioning of the glassware plant, which will come in later this year, we expect significant revenue gains from that particular plant. Also, normally this Q1 has been subdued, and we do not expect the rest of the year to go like this. Primarily, you are aware of, because of the elections and also because of the heat wave that was around the country. The footfalls overall were pretty. It was one of the worst that we've seen. So I do not expect the same in the rest of the year. We have already seen signs of improvement. So that is why we are pretty positive that the revenue should be in line of our expectations.
Understood. What is your expectation of top line from the new glassware plant this year?
Ideally, for us, it should add about INR 75 crore-INR 80 crore more revenue than the previous year.
Okay, than the previous year.
Yeah, than the previous year. Yeah.
Okay. That is entirely going to come in the next few quarters.
That was not present basically last year.
Correct. Fair point. Second is, there was an increase in receivable days and channel inventory that you had indicated in the last call. The expectation was it will moderate by September. Is that on track or because of acute weakness in demand, have inventory levels gone up further? Essentially, the question is that do you foresee any channel inventory correction during the course of the year, or are you comfortable with the levels in there?
So actually, even during quarter one, we have seen our secondary sales performing much better than what primary we were able to achieve. So definitely there is easing of the stock positions at our channel partners as well. So I feel there is correction, though it has not significantly come in in terms of the working capital. But it is definitely improving. So we will see some improvement by the end of the first half of this year.
Understood. So June quarter and working capital is slightly better than March quarter? Or maybe if you can share the numbers later in the call, if Atul Parolia can share some color later.
Sorry to interrupt, but it was not significantly better, but it has improved. But we expect more improvement in the next couple of months.
Understood. Final question is, some key objectives for QIP were one, was you looking at some inorganic opportunities, and second is it would enable you to proceed with consolidation or merger of Wim Plast also. So what are the timelines on this, and can we expect some updates on both these aspects?
On the inorganic growth front, as I mentioned earlier as well, we have been looking at some opportunities and they are on the table at this point of time, and we will try to close them as soon as possible. Apart from that, in terms of the plant that we had indicated in Rajasthan for the steelware and the thermoware and the plasticware both, is in line. It would take about 8- 10 months for it to be commissioned. But we have started the process of the machinery and the erection of the plant. So that is in line. In terms of Wim Plast, ideally, of course, from a management perspective, we would like both of them to be merged. And once it is decided by both the boards, I think we will be able to go ahead on that as well.
Sure. Lastly, your guidance, 15%-17% does not factor in any potential inorganic, right? So that is all organic as of now?
That is pretty much organic at this point in time, yes.
Sure. Thank you so much. I will get back in the queue.
Yeah, sure.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Nilesh Patil from ICICI Securities Limited. Please go ahead.
Yeah. Thanks for the opportunity. I just wanted to understand, you have mentioned that in the Writing Instruments segment, there will be an entry of geometry boxes and marker segment. Could you please throw some light on it? Could you also share some light on the kind of lower growth into Writing Instruments segment, considering the year has reported good set of numbers in the segment. Could you please share some light on Writing Instruments particularly? My other question is related to the channel distribution. Could you please shed some light on general trade and other channels? How have they performed into this quarter particularly? Is the total, you can say, subdued performance due to lower kind of growth into general trade, particularly?
Sure. Your first question, basically, Writing Instruments overall in the Pen segment has been slightly subdued. If you see other players in the Pen segment, it is pretty flattish for everyone. If you are talking about a couple of players who are more into the stationery side or the art side of things, which is mainly for kids, crayons and other writers, that has performed better. I guess they are not comparable completely. Second of all, I think the geometry boxes and the crayons are in process. We will be coming out with those product lines very soon.
There is no timeline as per se because we are working on the machinery side and the plant side of things, so it might take slightly long, but it of course will come in most likely in the second half of the year, in terms of the revenue that can be generated out of those businesses. Thirdly, in terms of geographical distribution, now we have pretty much covered most of India, in terms of the Writing Instruments segment. We have a couple of geographies that we still are slightly weaker in, which we would like to strengthen at this point of time. So that will help us improve our numbers over the year. In terms of general trade, general trade still is about 74% of our sales.
You are right that general trade has been weaker in this particular quarter, though I don't foresee it to be weaker the entire year. But this particular quarter, yes, general trade has struggled more compared to other verticals, and that is where you see that some numbers have not significantly changed, but it has changed slightly up to 5%. The channel mix has changed. Because from 80%, it went down to 74% for this quarter. So slight shift, but we don't see that happening over the entire year.
Yeah, okay. Thank you. Going ahead, do we expect the dependence on general trade to kind of a bit lower and kind of increase into our alternate channels?
We are always trying to improve our alternate channels, that's it. But I think if you inline with the industry standards, I do not see a very big change coming very soon, but we have seen some shift for e-commerce has started doing slightly better than our expectations. So I think there should be some growth there, but not significant changes in the mix.
Understood. Thank you. Thanks a lot for the information.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Sumant Kumar from Motilal Oswal Financial Services. Please go ahead.
Yeah. Hi, sir. Can you talk about how the consumer glassware are performing in this quarter and the plant status? When we can expect a ramp-up of the new plant?
Sure. Basically, the consumer glassware also has performed pretty much in line with all the other Consumerware products. The same growth. Basically, it has been ramped up in terms of the opalware plant, we have pretty much ramped up everything. Now we have some capacity. We are at about 75% capacity utilization at this point of time. But we hope to improve this over the year. And of course, the first quarter for glassware is always slightly weaker than the second and the third. We expect it to grow much faster. Secondly, in terms of the ramp-up of the glassware plant, we are pretty much ready. Our firing date for the plant, we had actually kept it for end of August.
But we are slightly intentionally actually delaying it, because it takes about 40- 45 days for the glass to come out, and we would be right in the middle of the season of Diwali, and at that particular point of time was not ideal to launch a new product line. We are going a little ahead of our timeline intentionally, by about 15- 20 days. We are looking at about mid-September kind of commissioning date, which will help us just after the season launch the product more effectively.
Can you talk about the export Writing Instruments export growth? How it is at presently?
Export predominantly, it's in the S tationery segment for us. The rest of the items, there is very meager revenue sales contribution for the other product lines. I guess this thing has performed decently well. It's in line where previously as well, as we have always said that it's about 40% of our stationery business or the pen business, and it continues to be the same in terms of the mix.
Have you seen the growth in Writing Instruments export this quarter?
No, this quarter, not really. It actually improved slightly, exports for us.
The domestic has grown this quarter?
Domestic is slightly on the degrowth side.
Okay.
Slightly, about 1.5%. Yes.
Okay. Considering there is intense competition in the Pen segment, our strategy to diversify to other products in this category, how soon this segment growth ahead because the Pen segment, I think other players are also entering into. Any other new big segment or is that you are going to increase the Pen segment of this particular channel?
Right. As I mentioned, I think that we will be entering the Stationery segment, so other stationery. We are predominantly today only into pens. Markers, crayons, geometry boxes is something that we have previously stated as well that we will be entering, and we will be doing this soon. I think, yes, you are right, it has become flattish. Though we do not anticipate this to be flat throughout the year, it is just this quarter. Hopefully we will have demand back. But yes, we will be entering definitely other segments.
And for all that, do you have a manufacturing facility? You will not outsource?
Not all of it. It will be a mix. It will be some outsourcing and some manufacturing.
Okay. Initially you will outsource and then you will have a manufacturing, correct?
Yes. Of course.
Okay. Thank you.
Thanks.
Thank you. Participant, you may press star and one to ask a question. The next question is from the line of Devanshu, an individual investor. Please go ahead.
Hello, am I audible?
Yes, absolutely. Please go ahead.
Hi, sir. Thank you for the opportunity. I just have slightly basic questions. So in the new plant that you will be ramping up or maybe, let's say, the manufacturing will start by the mid-September, you would primarily be manufacturing the borosilicate glassware, right? Not the other ones like maybe lead crystal or maybe tempered glass or something else. It will primarily be focusing on borosilicate, right?
No, actually this is not a borosilicate glass plant. This is a soda-lime. Soda-lime is your basic glasses, which is your drinking glasses which have no borosilicate kind of raw material in it. This is purely soda-lime. It's just jargon, but it's a different furnace also altogether.
Okay. So you are currently not, let's say, you don't have any plans for manufacturing the glasswares, specifically the borosilicate glasswares which go into laboratories or kitchenware or maybe lighting.
No. We are not getting into borosilicate glass, which is primarily lab-driven and baking-driven. We are not entering that.
Okay. I don't know why I had some understanding that you are currently trading in these products, so that is also not true as of now?
That is true. We still trade in these products.
Okay. No manufacturing plan as of now?
Correct.
Okay, sure. Thank you so much.
Thank you. The next question is from the line of Meet Jain from Motilal Oswal Financial Services. Please go ahead.
Hi, sir. Good morning. Just wanted to get some backdated numbers like for segment-wise consumer writing and molded. What kind of numbers were in FY 2024 to understand the growth of each segment?
Sure. Yes.
Segment-wise growth, as you have said, Consumerware has grown. Revenue has grown by 5.4%, Writing Instruments it is, and Molded Furniture has grown by 0.2%. Overall it comes to 6.1%.
Okay.
Whether if you see the EBITDA, overall it has increased by 6%, which was mainly contributed by the Molded Furniture and thereafter, Writing Instruments and Consumerware.
Okay. So our Molded Furniture business has driven the entire growth this quarter. Are we expecting similar kind of performance from molded furniture as we have seen margins are also very good in the molded furniture that has expanded the highest? So what kind of trajectory do you envision for the entire year all going ahead?
So of course, Molded Furniture grew in this quarter. But it was also a factor of the cooler business within the Molded Furniture business that actually performed very well in this quarter. So that is why you've seen that kind of a growth for Molded Furniture segment in this quarter.
Okay. And the cooler we outsource business primarily?
Yes, we outsource that element of it. Yes.
Okay. And just one, what growth was, as you mentioned, from Writing Instruments? What kind of degrowth?
It's about negative 0.2% is what the degrowth is.
0.2%?
Yeah.
Okay. Thank you. Thank you, sir. I am done.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Karan Bhatelia from Asian Market Securities. Please go ahead.
Hi, good morning. Am I audible?
Yes, sir.
Yeah. Gaurav, with respect to the adjustable market for the new product launches, maybe the markers, crayons, and geometry boxes, how big is this market? And second, how is the gross margin profile and the realization profile compared to our existing portfolio in pens?
I think there is a significant gain that is possible with this particular product line. The addressable market is huge, so I think it would be wrong for me to comment on the overall size. It is large. There are still gaps in the market that we see. Initially, we will be doing a mix of some manufacturing and some outsourcing. Of course, margins will be slightly lower than our current Pen business that is a complete manufacturing side. But eventually, as volumes grow, we would try to backward integrate and see where we can take margins.
Right. Correct to assume that the addressable market could be bigger than pens for these couple of categories?
We have never looked at it that way. We still think the Pens business is the largest and still has room to grow. So I believe, for us, it will just be an adjacent category.
Right.
We'll see how much we can of course gain in these segments.
Correct. In the last couple of calls, we did mention that there is substantial headroom of growth for our writing business in terms of channel partners, dealers, distributors. How do you see the growth for the FY 2025 across the three categories in terms of touch points?
I think in terms of the Pen business, of course, we have not covered all the geographies. We are just trying to cover most of them now, and of course, there are some weaknesses in a few markets. Some of the channel partners we still have to look at and see how we can align them better and grow those areas. So definitely there is some room there. In terms of our other businesses, I feel we pretty much pan-India, there's good coverage. We're just working on improving our product line further every day. That is why you're seeing improved margins because the products are improving. We're not pushing it as hard because we believe that in a bad market scenario, pushing our product too hard can yield revenues, but then at the expense of margins in the long term. That is why we've always been conservative on that front.
All right. Thanks for the clarification. I have further questions, I will follow up in the queue.
Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask a question. The next question is from the lineup, Grishma Shah from Envision Capital. Please go ahead.
Good morning, and thanks for taking my question. I want to understand what the margin trend over the next three quarters, given that growth in the Molded Furniture was primarily driven by coolers, and that is a seasonal business. Overall, how would the margins pan out with glassware capacity coming in and with coolers not contributing significantly over the next one or two quarters?
Are you talking primarily about Wim Plast or are you talking about the overall scenario?
Sir, overall business.
Right. I think, see, even today, the Wim Plast or Molded Furniture segment for us is still contributing very little to our overall revenue and profitability. I guess it is not a significant deterrent over the next few quarters. Our consumer businesses will grow much faster because normally they perform better during the second and the third quarter primarily because of the festive season. I guess that will be compensated by our other segment growing much faster during the next three quarters.
Okay. Margins should be within a comfortable range is what you are saying?
Yeah. See, margins, it's a competitive environment. It's not been the best of years. So 1%, 2% up and down, we've always said that it's possible that we might have to discount slightly but not significantly. We don't see that happen.
We are also coming from a base where the margins were slightly better based on lower input prices. What's the keen for this year? How have the raw material prices behaved?
I think we have reached a place where input prices are pretty much stabilized. We are not seeing a major reduction on any of the raw material or other packing material prices to go down significantly from here. I think we are pretty much in a stable condition at this point in time.
Okay, fine. Thanks for answering my questions and good luck.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next follow-up question is from the lineup, Jay Doshi from Kotak Securities Limited. Please go ahead.
Sure. Hi, thanks for the opportunity again. My question is on BIS, across all the categories that you operate in. Can you give us some flavor or color on where you think, from a slightly longer-term perspective you may end up being on the beneficiary side? We know a little bit about the vacuum glass bottles, but are there opportunities elsewhere also?
I think yes, BIS, though it has not been implemented very hardly at this point of time and still people continue to import the product. We actually do not have good clarity at this point of time, but of course if they are to implement, we are preparing ourselves in terms of the actual machinery and that we are putting up in Rajasthan. So we are taking the first step towards it. In the future, if there is no imports allowed or there is anything else that the government decides to do, then we will be in a good position to take advantage of that situation as well.
Understood. In terms of opportunities in other adjacent categories, are you considering or evaluating anything outside of your existing categories or anything that you find interesting where you may potentially enter, either through Wim Plast business or through-
Sir, yeah. So, of course, I think we've always been a company that has looked at adjacent categories. So of course, we will keep looking. At this point of time, I think we have enough on our plate for the next year and a half, two years, to perform and grow these categories that we are now entering. I guess, but of course, we are always on the lookout, and in the consumer goods business, it is extremely important to grow horizontally all the time. Yeah, for sure.
Got it. Thank you so much, and good luck.
Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask a question. The next question is from the line of Rakshit Desai from IIFL Finance. Please go ahead.
Hi, sir. This is Percy Panthaki here. Sir, just can you tell us what was the pricing element this quarter in the total growth?
I think pretty much it was price and volumes grew hand in hand because there was no input price reduction that came in this year. It was pretty flattish. Overall volume and value growth have been in line for this quarter.
Understood. What is your general thought process on acquisitions? Would you use acquisitions to enter into something new or would you use it to consolidate market shares in your existing business?
A little bit of both. To consolidate as well if we get some opportunities at a good price that we are able to acquire. We are already looking at that in our current horizon as well. And of course, if there is some adjacent categories that have some synergies, we are definitely open to look at those kinds of opportunities as well.
Understood. In your core business, that is sort of Consumerware, houseware, ex- glassware, what do you think are the growth drivers of the business at a company specific level? I understand the macro construct, penetration, upgradation, et cetera. But at a company level, what is it that you are doing in order to accelerate the growth?
I think as you know, we are already entering into newer segments in the glassware side also. So we've been primarily into opalware. We're getting into the soda-lime glass as well. So glass for us in this segment is going to be a very quick driver. Apart from that, all our other segments, whether it's hydration or lunch packs or casseroles, they continue to grow pretty well. The idea has always been to upgrade the product line, to premiumize it further. And I think that will help us grow this category much faster.
Any update on distribution in terms of number of outlets you directly reach and how that has increased over the last couple of years or so?
So I think in the consumer goods business, it is pretty much flattish, the number of outlets. It is about 56,000 is the universe that we cover. And 80% of it is actually a very frequent business, and the other is slightly, we touch it maybe a few times a year. So I think that way, that universe has remained the same. But of course, some people have expanded their shops, they have improved their product portfolio. So I think that is what we are seeing. Current shop owners building better shops.
Understood. And your e-commerce salience of the portfolio, how much is that now and how it has moved over the last couple of years?
So I think e-commerce for us has been a couple of percentage points increase this quarter as well, and I think it is about 10% of our overall sales, which I think can improve over time by about 3%- 4% in the next two, three years. We could look at something like 15% of revenue mix coming from e-commerce.
Understood. And according to you, in e-commerce, what are the key success factors in this industry?
I think for us a known brand is very important, even in the e-commerce space, because most of the players are either B2C players, so the level of trust is very limited with those kind of players. I think that's one of our biggest plays because we've been in the market for so long and are known player in the houseware space. Also, I think slightly, of course, makes a lot of difference in the e-commerce side, and we are able to reach the customer quicker. I think that's another important reason why e-commerce has picked up. Also, of course, we offer better product lines in terms of our premium product lines, which sometimes don't do very well in some parts of GT, but start doing very well on e-commerce. I think e-commerce is slightly a more premium platform as well.
We're able to showcase our products better, and able to garner customers that we would have probably not been able to from our general sales.
Understood. That's all from me. Thank you and all the best.
Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask a question. The next follow-up question is from the line of Karan Bhatelia from Asian Market Securities. Please go ahead.
Hi, thanks for the opportunity. Gaurav, how is your value addition portfolio across categories, Writing Instruments, Molded Furniture, and Consumerware, how are we seeing this in next two years to say so?
I think that's an evolution. Of course, we are trying to get into a much better or slightly more premium product lines. When I say premium, it doesn't mean that we are going out of our segment of mass premium as a brand. We are just trying to improve the product line with better molds, better processes, because that's the moat in this segment. And improvement in Because India still is a very price-conscious market, and we are wary of that. And so improvement is coming from purely design and aesthetics and better finishes. I think that's what we have been always doing. And of course, it's an evolution. In the next two years, we would like to evolve into much better overall product lines, which we are continuously doing, and that is why you see gross margins being maintained or slightly improving as well.
Right. See, for example, in Molded Furniture, correctly, we are at 15%-20% of value addition, right?
Correct.
How is this percentage for the other two core categories?
Molded Furniture actually is very easy to compare. The other is not really comparable, because there is a lot of product lines that some people would say value-added, but because the number of product lines are so huge. When I talk about the newer stuff that they are coming with, say we added about 300 odd products last year in our Consumerware segment. Pretty much 80% of that portfolio was all products that were with much improved finishes and aesthetics.
I see.
I think pretty much everything there over about a couple of years would change to that kind of a product line.
Okay. Done. I got it.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all the participants, you may press star and one to ask a question. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you everyone for joining us today. I hope we have been able to answer all your query. We look forward to such interactions in the future. In case you require any further details, you may contact SGA, our investor relationships partner. Thank you.
Thank you everyone.
Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.