Buy This Midcap Stock, Parent Of Sleepwell Brand To Gain 25% Potential Return: ICICI Direct

ICICI Direct, a top brokerage firm recommends investors to buy the stock of Sheela Foam (SFL). Revenue, earnings grew at CAGR of 11%, 13%, respectively, in FY18-22. Cash surplus balance sheet with last 3-year's average RoE, RoCE of 19%, 22%, respectively.

Stock To Buy: Target Price

The Current Market Price (CMP) of Sheela Foam is Rs. 2925. ICICI Direct has estimated a Target Price for the stock at Rs. 3650. It is a mid-cap stock with a market capitalization of around Rs. 14,992 crore. This stock has the potential to give 25% return, in the upcoming 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 2925
Target Price	Rs. 3650
Potential 1 year return	25.00%
52 week high share price	Rs. 4,055
52 week low share price	Rs. 2,246.25

Financials

The company's net sales in FY22 was recorded at Rs. 2981.8 crore, which is expected to be at Rs. 3364.4 crore in FY23. Their EBITDA in FY22 stood at Rs. 314.9 crore, which is expected to be at Rs. 367.9 crore in FY23. The company's net profit in FY22 was recorded at Rs. 217.3 crore, which is expected to be at Rs. 252.5 crore in FY23.

Stock Advantages: ICICI Direct

ICICI Direct, "SFL's share price has grown ~3x since its listing in December 2017. We value SFL at 55x FY24EPS to arrive at a target price of Rs. 3650/share. The capacity expansion will help the company to gain market share. Under China +1 strategy of multinational companies, SFL is exploring various export opportunities to US markets through its domestic and Spanish subsidiary 'Interplasp'. SFL has received approval to supply foam to Indian Railways for Vande Bharat trains. This, coupled with a revival in the auto business, will help drive the company's technical foam business, going forward."

Mattresses industry growth

The modern mattresses industry is pegged at around Rs. 17,500 crore and is likely to grow at 12% CAGR in FY22-26E. The organised industry is expected to gain market share through new product launches and strong balance sheet condition from unorganised players, which command 60% of the total pie. SFL envisages a capex of Rs. 350 crore over the next two years to increase its manufacturing capacity by 23% in India & overseas.

Company Portfolio:

Sheela Foam (SFL) is the market leader in the domestic mattresses industry with a value market share of ~25% in the organised segment. The company's "Sleepwell" is one of the leading brands in the domestic mattresses industry. It has a pan-India presence through ~6000 MBOs and ~5500 EBOs, respectively. Apart from India (contributes ~70% to the topline), the company also manufactures Polyutherene (PU)/technical foams in Australia and Spain with revenue contributions of 15% each. SFL has envisaged a capex of Rs. 350 crore to increase its consolidated capacity by ~23% in the next two years.

Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.