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SFL: 3407 Long Term Sales: 17 CYear: 30 Huge Demand But Inflations Hurt Profits 9M Re

Lesson 147/225 | Study Time: 5 Min

Course: Top Quality Companies

Company:

Well Known with the brand “SleepWell” For Mattresses, "FEATHERFOAM" for PU Foam & "LamiFlex" a polyester Foam. They know how to convert the Product to Brand. Sheela Foam Limited is the top player in the mattress and foam products industry in India. The company has a global manufacturing footprint with 10 nationwide manufacturing plants in India (20-25% MarketShare), 3 in Australia (40% Marketshare), and 1 in Spain. It has a strong presence and market share in Australia through its wholly-owned subsidiary, Joyce Foam Pty Ltd. and also in Spain through its subsidiary, Interplasp S.L. Smt. Sheela Gautam, Chairperson Emeritus, was the founder of the Sheela Group & also a member of the Lok Sabha four times from 1991 onwards. Incorporated in 1971, Sheela Foam is the market leader and the largest manufacturer of Polyurethane Foam (PU) in India. SFL manufactures various foam-based home comfort products like mattresses, Furniture cushions, as well as technical grades of polyurethane foams for end-use in a range of industries like automobile, acoustics, etc.

History:

Low debt, strong marketshare, and high growth company from Home furnishing. When Growth, Quality, and Value Combines we see wealth creation. They are able to grow revenue and profit from 750 Cr and 8 Cr just 9 years back and came with the IPO during 2017 we spotted them as the wealth creator considering low debt, strong marketshare, and consistent profits. During IPO their sales and Profits were 1770 Cr & 125 Cr just 5 Years back. Post-2017 we saw the global economy getting muted and covid came in fy2020. Yet we may see this year SFL post the sales of 3000 Cr and Profits of 220 Cr shows committed growth even during muted phase economy. If Invested in after the IPO at 860 we saw the share rally by 4X just in 5 years. Currently, they do not distribute dividends which suggest it is better for young investors and not good for retired investors as a direct cash flow to our bank is not there. Yes, a wealth creator as We may see them cross the landmark sales of 10000 Cr till 2030. High growth in the future could be seen here which could help investors see multi-year rallies. Many people in the group have been holding since IPO 5 years back & Still no need to worry and can hold this stock as a wealth creator stock.

Current Trend:

The current year since beginning the whole Home Furnishing sector was in boom either you see Asian paints or Kajaria or here in our case SFL. 9M sales have grown by 30% which is good but yet they were a little less than estimated due to a slowdown in discretionary spending due to inflationary pressures. Mattress sales which is responsible for 40% of sales were in de-growth of 7% during Q3. During the quarter, the prices of the key raw materials of TDI and Polyol remained highly volatile and increased on a QoQ basis, with TDI prices reaching an all-time high. The increase in raw material prices combined with an increase in sales and marketing expenses impacted the overall margins and profitability. Profits fell during 9M result by 7% v/s growth of 24% during H1 shows inflation hurting the Profits. During the quarter, the company launched its own e-commerce platform called Mysleepwell.com. All those holding since long can now have the strategy of New buying again during any fall near in the whole range of 2676 to 1741 (Upgraded from 1800). Can hold it as a wealth creator stock. This year itself target should be 4546(Monthly Bullishengufing) & in the next 4 years, we may see 5618 (YearlyBullishEngufling). All those who just added during the current fall near 1200 can book some 5% profits near 4546 this year during the rally. The Stock with expected Multi-year rally.

Kotak Bank MF and DSP added around 35000 & 10 lakh shares respectively during the last 9 months. Now they both have more than 5% total holding. The company pays no dividend in spite of good earnings, high commitment from the promoter side. Strong 75% Promoter Holding, 24% MF Holding & 2% FPI.

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Piyush Patel

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