Buy Sheela Foam, target price Rs 1700: ICICI Securities

ICICI Securities has given a buy rating to Sheela Foam with a target price of Rs 1700. The share price moved up by 0.13 per cent from its previous close of Rs 1302.80. The stock’s last traded price is Rs 1304.45.

Sheela Foam Ltd., incorporated in the year 1971, is a Mid Cap company (having a market cap of Rs 6401.77 Crore) operating in Consumer Durables sector.

Financials
For the quarter ended 30-09-2020, the company reported a Consolidated sales of Rs 607.83 Crore, up 125.98 % from last quarter Sales of Rs 268.97 Crore and up 22.23 % from last year same quarter Sales of Rs 497.28 Crore Company reported net profit after tax of Rs 69.84 Crore in latest quarter.

Investment Rationale
The brokerage increases FY22E estimates by 13%; modelling revenue/ EBITDA / PAT CAGR of 18% / 20% / 20% over FY20-22E. Upgrade to BUY (from Add) with a DCF-based revised target price of Rs 1,700 (was 1,500). At the target price, the stock will trade at 25x P/E multiple Sep-22E. Key downside risks are (1) adverse movement in prices of key inputs – TDI and polyol together contribute c.73% to total input costs and (2) increase in competitive intensity from global players or Indian e-commerce.

Promoter/FII Holdings
Promoters held 73 per cent stake in the company as of Sept 30, 2020, while FIIs held 1.7 per cent, DIIs 23.3 per cent and public and others 2.1 per cent.