#SFL (Sheetla Foam Ltd.)

5 days ago

Based on the detailed information from Sheela Foam Ltd.'s investor presentation for Q2 & H1 FY25, here’s a breakdown of reasons to buy or avoid this stock:

#SFL @ 846
Consider this number as a Target

Target 1 @ 959+

Target 2 @ 1038+

Target 3 @ 1116+

Target 4 @ 1371+

Target 5 @ 1863+

Target 6 @ 2451+++

### Reasons to Buy:

1. Strong Market Presence:
- Sheela Foam holds a ~30% market share in India's mattress segment, with trusted brands like Sleepwell and Kurlon.
- It also has a 40% market share in Australia, highlighting its international strength.

2. Diverse Global Footprint:
- Operations in India, Australia, and Spain with significant manufacturing capacity in each region.
- Backward integration ensures a wide product basket and cost efficiencies.

3. Revenue Growth:
- Consolidated revenue grew 29% YoY in H1 FY25, indicating strong operational performance.
- Expanding distribution network with a growing number of exclusive brand outlets (EBOs).

4. Focus on High-Margin Products:
- Strategic shift towards premium and high-margin products to improve profitability.

5. Trusted Brand Value:
- Recognized as India’s No.1 mattress brand by TOI and has a strong digital presence with over 86.9M total reach.

Reasons to Avoid:

1. Declining Margins:
- EBITDA margin decreased to 8% in H1 FY25 from 11% YoY. Profit after tax (PAT) margin also dropped from 7% to 3%.

2. Rising Costs:
- Finance costs surged 3.5x YoY in H1 FY25, affecting net profitability.

3. Increased Debt Levels:
- Borrowings have significantly increased, which may pressure the balance sheet.

4. Competitive Industry:
- The mattress and foam markets face stiff competition, which could compress margins further if price wars intensify.

5. Stock Performance:
- The stock is trading near its 52-week low, and its market cap has been under pressure, indicating potential investor concerns.

Key Technical Insights:
- The current price (CMP) is INR 919.95 with a 52-week high of INR 1,285.4 and low of INR 874.1. It suggests consolidation near the lower range, which could offer a rebound opportunity if fundamentals improve.

Inside News:
- Recent launches like the foldable mattresses TARANG (Sleepwell) and AARAM (Kurlon) cater to rural and budget segments, potentially driving growth.
- A collaborative initiative with the Indian Society of Sleep Research enhances brand visibility and positions the company as a thought leader in the health and wellness space.

Would you like a deeper analysis or additional details?