Sheela Foam shares decline for the sixth straight day to hit a new 52-week low

Shares of Sheela Foam, a company engaged in the manufacturing of polyurethane foams in India and owner of the ‘Sleepwell’ brand, declined for the sixth straight consecutive session to hit a new 52-week-low on Friday.

The stock has dropped over 5 percent in the last six trading sessions and is now down over 46 percent from its 52-week high of Rs 2,027 seen on April 13, 2022.

Sheela Foam is the market leader in the domestic mattresses industry with a market share of around 25 percent in the organised segment. The company’s ‘Sleepwell’ is one of the leading brands in the domestic mattresses industry. Apart from India, Sheela Foam also manufactures Polyethylene foams and technical foams in Australia and Spain.

In the recently-concluded December 2022 quarter, Sheela Foam’s revenue was down 7.3 percent to around Rs 817 crore compared with the year-ago quarter. The revenue growth was mainly dragged down by a nearly 17 percent drop in the home care segment.

Gross margin increased 310 basis points compared with the year-ago period, led by easing raw material costs. However, EBITDA (earnings before interest, tax, depreciation and amortisation) margin declined 151 basis points year-on-year to 9.3 percent dragged by low operating leverage and one-off expenses.

Lower sales and EBITDA margin pressure dragged the company’s profit after tax (PAT) down by 9.5 percent in the December quarter to Rs 60.5 crore.

Post the quarterly earnings, brokerage firm ICICI Direct in its research report dated February 6 advised investors to ‘buy’ the stock with a 12-month price target of Rs 1,450.

ICICI Direct said that Sheela Foam has envisaged a capex of Rs 350 crore over the next two years to increase its manufacturing capacity by 23 percent in India and overseas, which should augur well for the stock.

Sheela Foam has also received approval to supply foam to the Indian Railways for the Vande Bharat trains. This, coupled with a revival in the auto business, will help drive the company’s technical foam business in the near to medium term, added the brokerage firm.

Shares of Sheela Foam are off the day's low, currently trading 0.2 percent higher at Rs 1,104.3.