|Subscription: Sheela Foam Limited IPO ( x times)|
Anchor Investors: Even as the market is in turmoil , subsequent to demonetization and other factors, Sheela Foam Limited IPO saw good response from anchor investors with for more than 10-times the number of shares from the anchor book.The anchor investors include leading international & domestic investors mainly Mutual funds and insurance companies namely: Fidelity, Goldman Sachs, East Spring, HDFC MF, SBI MF, ICICI Pru AMC, Premji Invest, IDFC MF and Sundaram MF. Complete Anchor List : http://bit.ly/2ftYiYi Views of Brokerages, Analysts, Business New Papers, Management views
SPA Research : At the upper end of the price band, the stock will trade at PE multiple of 27x its FY17 which is reasonable compared to many consumer stocks which are trading at valuation of over 30 times their earnings and given SFL’s leadership position and scope for improvement in return ratios driven by higher operating leverage. It recommends subscribing to the issue with long term perspective. It is positive on the company due to its dominant market share and the mattress manufacturer is in a sweet spot due to shift to organised sector driven by GST implementation, rising urbanization, increase in disposable income, increase in health related issues of the Indian population and increasing awareness about sleep products. It expects Sheela Foam’s earning to grow at a CAGR of 15-20 percent over FY16-19.
Centrum Wealth: At the higher end of the price band of Rs 730, the stock is valued at 19.1x EV/EBITDA and 34.0x P/E on FY16 basis which looks fully priced.
Way2Wealth: At the offer price band of `680-730/- the issue is available at P/E of ~27-29x its FY17 estimated EPS . The offer is for sale by the promoter group. No fresh money will be inducted into the company. While the profit margins have improved over one year they have been erratic in nature. GST holds a huge potential for the company in the future. We are NEUTRAL on the issue.
Angel Broking: On its FY17E’s PAT of `121cr, the issue on its upper band is priced at P/E ratio of 27x which is at par with consumer durable peers which have strong brand and higher B2C sales. We consider following strong points as well 1) Net cash positive balance sheet, 2) easing working capital cycle from >40 days in FY12 to current 26 days, 3) improving return ratios with better product mix and 4) promoters experience. Considering the market conditions we would not suggest IPO for listing gains but rather we recommend ‘Subscribe’ on this issue for medium to long term perspective.
Religare Securities: At the upper end of the price band, the share will be available at 34 times PE at FY16 earnings. Good growth prospects, healthy and improving return ratios and low leverage (debt-equity has declined consistently from 1.8 times in FY12 to 0.2 times in H1FY17) should provide valuation comfort in the long run.
SMC Investments & Advisors: Sheela Foams has a significant opportunity to leverage its ‘Sleepwell’ brand to further improve its market share. However None of the listed companies in India are engaged in this line of business. Given the present secondary market condition, only serious long term investors who want to add some new business into their portfolios, may opt for the issueSP Tulsian: At the upper end of Rs. 730, company will have a market cap of Rs. 3,560 crore and enterprise value (EV) of Rs.3,514 crore, which leads to a PE multiple of 34x and 28x, on FY16 and FY17E EPS respectively, while EV/EBITDA multiple is 18x and 15x. While there are no comparable listed peers, an indicative comparison can be made with discretionary household product makers such as paints (Asian, Berger, Kansai) and sanitary ware (Cera, Somany) which are curenlty ruling at PE multiples in the range of 26-42x, based on FY17E earnings. Thus, pricing of the issue is not too stretched. However, given the market conditions, where existing blue chips and quality mid-caps are ruling at mouth-watering valuations, investors and market may not pay much heed to the issue. Faulty timing may harm on the issue adversely. Expecting subdued response given the ongoing market bearishness, coupled with near term negative impact of demonetisation, one can give the issue a miss, despite good fundamentals. Business Standard: Sheela Foam IPO: There’s comfort for long-term investors. Capital Market: Score 39/100; There is no listed peer to compare with Sheela Foam. Overall, the company has a solid brand and an attractive business, but asking P/E of 34 on a sharply high FY 2016 EPS is not comfortable.