ICICI Securities's research report on Sheela Foam
Consol. revenue (organic) performance (-10% YoY) was dragged by a continued decline in its B2B businesses (led by price corrections). Positively, branded mattress volumes are growing well with accelerated growth in Sleepwell (+31% YoY) and Kurl on (+17% YoY) driven by launches and TVC campaigns. Kurl-on, acquisition is tracking well with improved volume growth performance and profitability (operating margin doubled to 7%; further, cost synergies of ~200bps expected in FY25). As expected, breakeven in Furlenco business since Feb’24 has further reduced drag on profitability. Continued reinvestment of gross margin benefits towards higher ad spends, to revive consumer demand for branded mattresses, is a positive. Maintain BUY.
Outlook
Our earnings estimates are largely unchanged, modelling revenue / EBITDA / PAT CAGR of 20% / 38% / 53% over FY24-26E. Maintain BUY with a DCF-based unchanged target price of INR 1,150. Key downside risks are: 1) adverse movement in prices of key inputs; and 2) increase in competition from global players/Indian e-commerce.
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