This Small Cap Stock Trading 1.03% Up From 52 Week Low, ICICI Direct Assigns Buy For 30% Gains

Leading brokerage firm ICICI Direct has assigned a "buy" tag to Sheela Foam Limited (SFL) with a target price of Rs 1,650 apiece to the stock. If we consider this, the stock purchased at the current market price would fetch up to 30% gains in 12 months. It is a small-cap Consumer Durable sector company having a market cap of Rs 6,220.05 crore.

CMP, 52-Week Low/High, & Returns Over the Years

The current market price (CMP) of the stock is Rs 1,275.05 apiece on NSE, down 1.66% from its previous close. The stock today hits the 52-week low at Rs 1,262 apiece. Its 52 week high is Rs 2,027.50 apiece recorded on 13 April 2022. In the past 1 week it fell by 50.89%, in the past 1 month it fell by 52.35%, and in the past 3 months, it fell by 58.36%, respectively. In the past 1 year, it fell by 60.5% and in the past 5 years, it fell by 24.22%, respectively.

Sheela Foam turns ex-bonus today

Sheela Foam made an announcement for issue of bonus shares on December 12, 2022. The ratio was one bonus equity share of Rs 5 each fully paid up for every one existing equity shares of Rs 5 each fully paid up (i.e. in the ratio of 1:1) held by shareholders as on record date (December 22, 2022).

Sheela Foam turns ex-bonus today i.e. December 21. Accordingly, the share price has been adjusted to ~Rs 1300/share in opening trade today against the last closing price of Rs 2,593/share yesterday.

With fundamentals remaining unchanged and with unchanged estimates, we maintain our BUY rating on the stock. Our target price, however, is now revised to Rs 1650/share i.e. 50x PE on FY24 EPS of Rs 33/share

Key triggers for future price performance

• Modern mattresses industry is pegged at ~Rs 17,500 crore. It is likely to grow at 12% CAGR in FY22-26E. Organised players are likely to gain market share through new product launches and strong balance sheet condition.
• The company envisages a capex of Rs 350 crore over the next two years to increase its manufacturing capacity by 23% in India & overseas.
• 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.

About the stock

Sheela Foam (SFL) is the market leader in domestic mattresses industry with a value market share of ~25% in organised segment. The company's "Sleepwell" is one of the leading brands in the domestic mattresses industry. Apart from India (contributes ~70% to topline), SFL also manufactures Polyutherene (PU)/technical foams in Australia and Spain with revenue contributions of 15% each. Revenue, earnings grew at CAGR of 11%, 13%, respectively, in FY18-22. Cash surplus b/s with average three-years RoE, RoCE of 19%, 22% respectively.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.