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ICICI Securities Report
Sheela Foam Ltd. reported a disappointing Q4 FY22 revenue performance (up 4% YoY) was further exacerbated by continued weak gross margin print of 37.4% (lower by ~12% from pre-Covid levels).
India branded volumes declined 6% YoY but were up 4% on a three-year compound annual growth rate basis. While raw material inflation does not appear to be an incremental worry, the disappointment in Ebitda margin was led by higher opex.
Growth in business-to-business business was relatively better. Australia business reported an uptick (up 4% YoY) while Spain business continued to be weak (down 6% YoY).
Our positive stance on Sheela Foam is based on the long-term opportunities which also embellish the narrative -
benefit from China plus strategy of buyers in the U.S., Europe,
opportunity in furniture cushioning and manufacturing (under SleepX brand),
sustained acceleration in India business growth (competitive edge through 5,000 plus exclusive brand outlet network),
consumers realising importance of good quality mattress and
focus on growing e-commerce channel.
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