Good Financials but expensive Valuations

• Cello World operates in diverse consumer-oriented industries, including consumer goods, stationery, and furniture. The company's financial performance has been impressive, with consistent growth in both its topline and bottom line. Even in the most recent quarter, the company has shown strong year-over-year (YoY) growth.​One key strength of Cello World is its consistently positive cash flow from operations over the last three years, indicating a healthy financial foundation. Additionally, the company boasts an impressive Return on Equity (ROE) of 40%, signifying its ability to generate substantial returns for its shareholders.
• However, what truly sets Cello World apart from its peers is its remarkable Return on Capital Employed (ROCE) of 45%, significantly surpassing industry standards. This indicates that the company efficiently utilizes its capital to generate profits, which is an attractive feature for investors.

Rich valuations

• Despite its robust financial performance, the company's valuation metrics may raise concerns for potential investors. Cello World is asking for a Price-to-Earnings (PE) ratio of 48x and its market capitalization-to-sales ratio of 7.5x is considerably higher than the industry average of 4x. These elevated valuation metrics suggest that investors may face limited potential for capital appreciation. Hence, we are neutral on this ipo.