Broker’s call: Sheela Foam (Buy)

Target: 1,311 rupees

CMP: INR 1,158.95

Sheila Foam Ltd, founded in 1971, is the largest polyurethane (PU) foam manufacturer in the Asia Pacific region. With a strong foothold in India, the company has secured a dominant position in key industries such as mattresses (30-35 percent), automobiles (70-75 percent), shoes, underwear and furniture.

The company’s future growth is based on several drivers. Firstly, the Union Government’s ambitious plan to develop Vande Bharat trains opens up huge revenue opportunities. Secondly, in the Indian B2C segment, the company aims to revolutionize the unstructured mattress market and expand its retail footprint with the M5 brand. Third, the strategic acquisition in Spain in 2019 gives access to the burgeoning European market and export prospects, while in Australia, the company benefits from the rising trend of national industrialization.

These carefully planned moves, coupled with ambitious growth targets and a focus on various sectors and countries, positions the company for compelling and sustainable growth prospects.

Growth drivers include emerging Indian B2B opportunities, B2C and D2C product launches, expansion of the Australian furniture and mattress industry, and increased exports from Spain to the US. To capitalize on the forecast, it has put in place a capital expenditure of Rs. 350 crore, guided by the commissioning by the first half of FY24.