Sheela Foam

Price on the date this research report is published -: 1400 Rs

Sheela foam is a 49 year completely debt free India company engaged in manufacture of foam-based home comfort products as well as technical grades of polyurethane foam (‘PU Foam’) for end use in a wide range of industries.

Established in 1971 over the last two decades, has developed Sleepwell as an overarching brand associated with comprehensive and quality home-comfort solutions . Today Sheela foam has more than 23% market share in organised market of mattresses in India marketed under its flagship brand ‘Sleepwell’. The foam production continues to be more than double of its nearest competitor.

The company has developed a pan-India distribution network that consists of over 110 exclusive distributors, over 2,750 exclusive retail dealers and over 3,500 multi-brand outlets. Sheela Foam currently owns and operates 11 manufacturing facilities in India. All of its facilities are utilized for manufacturing home comfort products, while five of these facilities also manufacture PU Foam

Business Segments and Products

The company manufactures -:

• Home comfort products
• Technical Products
• Institutional Products
• Joyce Foam
• Sleepwell Foundation
• Sleepedia

Home comfort products

Home comfort products include following Sleepwell Foundation and sleepedia which contains products manufactured and sold under the brand name Sleepwell. The company also manufactures mattresses , pillows , blankets , Furniture cushioning etc.

Sleepwell Comfort Cell mattresses are designed with Integrated Core Technology, to give proper support and alignment that is necessary and help in eliminating partner disturbances. The unique cell design maximizes airflow to keep the mattress fresh, while Special Edge Wall Design offers enhanced durability and seating support.

Sleepwell Home Comfort Products enhance sleep experience with a unique range of luxurious bed sheets, pillows, comforters, blankets, mattress protectors and support products to boost your sleep.

Mattresses include a broad range of mattresses such as-:

• COCOON MATTRESS
• COMFORT CELL RANGE
• TECHNOLOGY PRODUCTS
• BALANCE MATTRESSES
• BACK SUPPORT MATTRESSES
• BASIC MATTRESSES
• REVITAL RANGE
• NATURALLE
• GENX

Pillows

My Pillow – A range of customized pillows with enhanced neck support for the ultimate sleep experience. “My Pillow” range comes with options of “High Rise” or “Low Rise”, crafted to suit your exact needs.

Comforters

Light and cozy, Sleepwell Comforters are crafted with luxurious microfiber fillings, for a feather-soft feel. These premium comforters are designed to look good and feel great, in every season. With the addition of Neem Fresche technology, they also keep you safe from dust mites and allergens in your bedroom.

BEDSHEETS

BLANKETS

Sleepwell brings you the World’s softest blankets, with extra warmth for a perfect night’s sleep.

From knitted throws to gentle fabrics, the trendy designs all come with Neem Fresche technology for an extra healthy edge.

MATTRESS PROTECTOR

DOHAR

Sleepwell brings to you traditionally layered Dohars.

Sleepwell Dohars are created with 100% cotton for a perfect blend of comfort and aesthetics. 

With new Neem Fresche technology in all Sleepwell products, one only gets perfect comfort but protection from allergies and skin problems as well. Protection against dust mites, skin problems, and breathing allergies Remains effective even after multiple washes All-natural, bio-degradable and environmentally friendly Certified by U.S. E.P.A.

Furniture Cushioning

Apart from that under home comfort products company offers  Pure grade foams , Delux grade foams , Standard grade foams and Commercial grade foams.

Under Technical Product company offers-:

• Automotive foam
• Reticulated Foam
• Slientech Foam
• Sound Absorption Foam
• Speciality Foam
• Visco Elastic foam and many more

Major applications include

• Seat Covers
• Sound and Vibration Absorption
• Sun Visors
• Headliners
• Door Trims
• Theaters. Auditoria and Indoor Stadium
• Theaters. Auditoria and Indoor Stadium
• Broadcasting Rooms and Recording Studios
• Industrial Silencers
• Automobiles
• Acoustic Enclosures
• Mattresses
• Sofa-Sets
• Sports & Other Shoes
• Innerwear & Lingerie
• Clothing
• Lamination with Fabric/scrim
• Lamination with vinyl
• Lamination with leather/synthetic leather

Sheela foam also caters the need of the big Institutional such as Hotels and Hospitals by providing products which can be used for 

• Hotel Rooms
• Marriage Homes
• Club Guest House
• Resorts
• Furnished /Studio Flats
• Ward Bed
• Semi Fowler Bed
• Full Fowler Bed
• I.C.U. Bed
• Base Bed for Alfa Mattress
• Emergency Recovery Trolly
• OT Table
• Nursing Hostel
• Examination Table
• Examination Couche
• L.D.R Bed
• Stretcher Trolley

Sheela foam has recently ventured into the e-commerce side because that’s again another area where people would want to shop from home continues. Company has a brand called SleepX which is to be sold through Amazon and Flipkart and also through its own website mysleepwell.com where products which are bed-in-box etc. are being introduced in the market so that people can buy them from the safety of their homes without interacting with anybody.

As part of its international footprint, the company manufactures PU Foam in Australia through its wholly owned subsidiary, Joyce Foam Pty Ltd. Joyce Foam is the largest producer of Foam in Australia and supplies its high quality Foam to Global Mattresses and Furnishing Companies.

Joyce Foam Products manufactures the largest range of flexible open cell polyurethane foams in Australia, supplying a range of industries including bedding, furniture, medical, and specialist industrial applications.

Joyce Foam, SFL’s Australian foam subsidiary, commands ~30-35% of the Australian market and has become a mature business. However, management perceives huge growth potential for Interplasp as it currently has mere ~1% market share in the European Union—world’s largest polyurethane foam market. SFL believes management focus can help drive growth in Interplasp. In addition, Morocco and North Africa also remain potential growth drivers. 

In 2019 Sheela foam acquired majority stake in Spanish company Interplasp SL for €42 million ($46.7 million) to expand in Europe. The acquisition would give Sheela Foam a presence in Europe, the world’s largest polyurethane foam market.

Interplasp, which was established in 1987, makes polyurethane foam for bedding, furniture and other applications in Spain and Portugal. The company has a manufacturing facility in Yecla, in Spain, with a capacity to produce 22,000 tons of polyurethane foam. It also markets some of its foam to Morocco.

The acquisition would give Sheela Foam a presence in Europe, the world’s largest polyurethane foam market, the company said.

Interplasp, which was established in 1987, makes polyurethane foam for bedding, furniture and other applications in Spain and Portugal. The company has a manufacturing facility in Yecla, in Spain, with a capacity to produce 22,000 tons of polyurethane foam. It also markets some of its foam to Morocco.

The Spanish company’s turnover rose to €31.6 million from €24.1 million and €15.9 million in 2017 and 2016, respectively.

Financials

Q1FY21

• As reported by the company it was one of the weakest qtr so far among all the past many quarters probably form the time that the company has been listed. Company had done business of about Rs.270 Crores compared to Rs.500 plus Crores that was the normal due to COVID-19.

• Net Sales at Rs 127.18 crore in June 2020 down 70.81% from Rs. 435.67 crore in June 2019

• Quarterly Net Profit at Rs. 1.62 crore in June 2020 down 95.32%

• EBITDA stands at Rs. 13.05 crore in June 2020 down 79.33% from Rs. 63.12 crore

• Sheela Foam EPS has decreased to Rs. 0.33 in June 2020 from Rs. 7.10

For the year Ended Marc 2020

• Net Sales at Rs 390.22 crore in March 2020 down 13.49% from Rs. 451.05 crore

• Quarterly Net Profit at Rs. 26.09 crore in March 2020 down 22.63% from Rs. 33.72 crore

• EBITDA stands at Rs. 55.00 crore in March 2020 down 1.13% from Rs. 55.63 crore

• Sheela Foam EPS has decreased to Rs. 5.35 in March 2020 from Rs. 6.91

• Company has solid ROCE of an average 30% over past several years.
• Compounded Sales growth over 3y and 5y is 8% and 9% respectively.

• Compounded Profit Growth over 3y and 5y period is 15% and 34% respectively.
• Company has reserves of about 900 Crs
• Although the debt has gone up from 30cr last year to 310 cr , as said by the management that Indian Company remains 100% debt free while the increase in debt is on account of foreign subsidiary for which the loan is raised outside India.
• The reason as said by the management why company has not been paying dividend is because majority of the shares are held by the Promoters which could be one the reasons worth considering or looking at where management is actually thinking about small shareholders.

Sectorial Outlook

Rising incomes and expansion of the middle class and high-income segments is seen reshaping consumption trends . The Indian mattress market, comprising rubberised coir, polyurethane (PU) foam and spring mattresses, is poised to reach ` 140 bn by the fiscal year 2022. The mattress market in India has seen a remarkable transition from a dull, predictable and slow growth market to an aggressive, vibrant and lucrative marketplace. Technology advancement, innovative products, and consumers’ willingness for comfortable and durable mattresses have been driving the growth momentum. 

• PU foam mattresses account for a major share of approximately 50% of the overall organised market, followed by Coir and Spring mattresses, which constitute about 30% and 20% respectively 
• In India, branded mattresses are broadly consumed by two end-users – Residential and Institutional. While the residential segment accounts for around 80% to 85% of the total market, the institutional sector contributes the remaining 15% to 20%.

Institutional Buyings

Recently DSP Mutual fund acquired 16,90,000 shares via bulk deal from the promoters at a price of 1365 Rs making total purchase of about 230Cr . In addition DSP Midcap fund already held 15,55,000 shares previously.

Conclusion 

Over the past two decades, Sheela has cornered about 20-23% of the organised mattress market largely due to investments in the Sleepwell brand, clearly visible in its advertising spend that is comparable to leading FMCG brands. Another key differentiator is its exclusive brand outlet (EBO) network, which accounts for ~80% of revenue, much higher than any industry player. This along with launch of the ‘My Mattress’ concept (customized mattresses) has reinforced Sleepwell’s pricing power—evident from the cumulative 25% hike effected over the last two years. 

Sleepwell is likely to be a key beneficiary of high growth in the mattress industry driven by its aggressive branding, deepening reach and product innovation. The company is eying a market much larger than the cumulative size of other segments via its budget category brand Starlite. 

Sheela foam has OPM of above 10% and ROCE of above 30% avg additionally company is almost debt free and accompanied with Sound and Aggressive management Sheela foam is worth Exploring for Long term.

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