Sheela Foam (SFL) Q1 24/25 earnings summary

Executive summary

• Consolidated Q1 FY25 revenue rose to ₹810 crore, up 26% year-over-year, with standalone revenue at ₹504 crore and net profit at ₹47 crore; standalone net profit declined 25% to ₹32 crore.

• Integration of Kurlon (acquired Oct 2023) and SFL is 85-90% complete, with ERP, finance, and sales channels unified, leading to initial disruption but now stabilizing for future growth.

• Synergy benefits began to materialize, with operational cost savings and improved gross margins despite sales challenges from integration and ERP changes.

• Total comprehensive income attributable to shareholders was ₹46.20 crore for Q1 FY25.

Financial highlights

• Consolidated Q1 FY25 revenue was ₹810 crore, up from ₹645 crore in Q1 FY24 and down from ₹845 crore in Q4 FY24.

• Gross margin improved to 42.2% in Q1 FY25 from 38.7% in Q1 FY24; India business gross margin reached 44%.

• EBITDA margin declined to 7.4% in Q1 FY25 from 12.0% in Q1 FY24; standalone EBITDA margin at 9.45%.

• Net profit margin for Q1 FY25 was 6%, down from 7% in Q1 FY24; basic and diluted EPS were ₹4.23.

• Kurlon contributed an estimated ₹170-175 crore to consolidated revenue; Sheela Foam standalone at ₹440-445 crore.

Outlook and guidance

• Management expects double-digit year-over-year growth (around 15%) for the remainder of FY25 and into FY26, with sales expected to normalize and grow in Q2 and Q3.

• EBITDA margin guidance for FY25 is above 10%, with a medium-term target of 14-15% as integration synergies are realized.

• Gross margin expected to improve as further integration savings (₹100-150 crore) are realized over the next 6-9 months.

• The business is fully geared for topline growth from Q2 through Q4.

• Ongoing capacity expansion with capitalisation of a new foaming section at Mandla (Jabalpur) plant, amounting to ₹64.63 crore.