Hold Sheela Foam, target price Rs 1525: Edelweiss

Edelweiss has given a hold rating to Sheela Foam with a target price of Rs 1525. The share price moved down by 1.28 per cent from its previous close of Rs 1365.15. The stock’s last traded price is Rs 1347.65.

Sheela Foam Ltd., incorporated in the year 1971, is a Mid Cap company (having a market cap of Rs 6565.43 Crore) operating in Consumer Durables sector.

Financials
For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 268.97 Crore, down 46.64 % from last quarter Sales of Rs 504.11 Crore and down -47.70 % from last year same quarter Sales of Rs 514.24 Crore Company has reported net profit after tax of Rs 11.80 Crore in latest quarter.


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Investment Rationale
Factoring the miss on revenues, we are trimming FY21/22E EPS by 3%. Recovery for a discretionary category such as mattresses would take time. The brokerage values the standalone/subsidiary operations at 35x/10x FY22E EPS, which yields a revised TP of INR1,525 (INR1,1601 earlier). Upside risk: faster-than-expected recovery and exports surge; downside risk: RM prices overshooting.

Promoter/FII Holdings
Promoters held 75 per cent stake in the company as of June 30, 2020, while FIIs held 2.8 per cent, DIIs 20.1 per cent and public and others 2 per cent.