Sheela Foam: Ambitious Growth, Enhanced Profitability Ahead

Ashwin Thakker

— 1 min read
  • **Sales Outlook:** Targeting 15% revenue growth over the next three years.
  • **Showroom Expansion:** Plan to open 1,000 new showrooms in FY26, with 234 already operationalized in Q1.
  • **New Product Success:** Tarang and Aaram (sub-Rs. 10,000 category) targeting over Rs. 100 crores revenue in FY26.
  • **E-commerce Growth:** Expects 50% value growth via this channel in FY26.
  • **Kurlon Integration Benefits:** Realized annualized savings of Rs. 190 crores from integration; anticipate an additional Rs. 60 crores by FY26 end.
  • **Profitability Target:** Aiming for EBITDA margins of 14-15% within three years, driven by operating leverage and cost efficiencies.
  • **Fixed Costs:** Expect fixed costs to remain flat in FY26 due to savings offsetting inflation.

Sheela Foam Limited's Q1 FY26 earnings call revealed a compelling outlook. The company reported robust growth and outlined strategic initiatives expected to drive significant sales and margin expansion. This includes aggressive market penetration, Kurlon integration benefits, and e-commerce growth, setting the stage for future profitability.

Strategic Sales Expansion and Market Penetration

Sheela Foam is embarking on an aggressive market expansion strategy. The company aims to open approximately 1,000 new showrooms in FY '26, with 234 already operationalized in Q1. This expansion is heavily driven by integrating Kurlon's presence, particularly in North and West India. The sub-Rs. 10,000 mattress category, featuring 'Tarang' and 'Aaram' brands, shows significant promise, targeting 'Rs. 100 crores plus' in revenue for the current fiscal year. E-commerce also continues its robust growth, with a '50% value growth' expected in FY '26.

Margin Enhancement Through Integration and Efficiency

The successful integration of Kurlon has been a pivotal driver for Sheela Foam's improved profitability. Management reported 'Rs. 190 crores' in annualized savings already achieved through optimized channel networks, operating facilities, and procurement. These efficiencies contributed to the Q1 FY'26 consolidated EBITDA margin of '10.4%', up from 7.4% last year. The company anticipates further benefits, with a target EBITDA margin of 'around 14% to 15%' within three years, fueled by operating leverage and continued cost optimization, despite raw material price fluctuations.

Sheela Foam Limited's Q1 FY26 performance underscores its strategic vision for sustained growth. The aggressive market expansion, particularly leveraging the Kurlon integration and new product categories, is set to drive significant revenue. Concurrently, rigorous cost optimization and operational efficiencies are expected to enhance profitability, positioning the company for a robust financial future. The outlook remains positive for continued market leadership.

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