Sheela Foam Q1 2026: Marginal Growth in Sales, But Net Profit Takes a Sharp Fall

Sheela Foam, a name synonymous with India’s branded mattress market and the maker of the popular Sleepwell range, released its Q1 results for 2026. The report presents a puzzling mix of steady top-line performance and deeply eroded profitability. While sales nudged up slightly year-on-year, the company saw a staggering 64% drop in net profit, raising red flags for investors and analysts alike.

At first glance, the numbers appear stable. Revenue for the quarter ending June 2025 stood at ₹821 crore, up just 1% from ₹810 crore in June 2024. Operating profit (EBITDA), however, told a more optimistic story—climbing 26% to ₹75.4 crore compared to ₹59.8 crore in the same quarter last year. But the final net profit number fell dramatically to ₹7.16 crore, down from ₹46.6 crore a year ago.

The result? A sharp decline in Earnings Per Share (EPS), which plummeted 84% from ₹4.23 in June 2024 to just ₹0.68 in the current quarter.

What caused such a steep fall in the bottom line despite a better operational performance? Let’s dig deeper into the factors.

Margins Improve, But Not Enough

The EBITDA growth of 26% suggests that Sheela Foam is taking steps to control its operating costs or improve its gross margins. Perhaps input costs like polyurethane foam, a key raw material, have stabilized or come down. Or the company may have optimized its logistics, manufacturing efficiency, or product mix.

Still, this improvement wasn’t sufficient to protect net profits, which cratered. A 26% increase in EBITDA typically signals healthier business activity, but it was completely overshadowed by other financial hits further down the income statement.

Net Profit Nosedives: What’s Going On?

From ₹46.6 crore in Q1 2025 to just ₹7.16 crore in Q1 2026, the collapse in net profit is too severe to ignore. There could be several culprits here:

1. Interest Expenses: If Sheela Foam has taken on additional debt—possibly from recent acquisitions or capacity expansions—it would reflect in rising finance costs.

2. Depreciation and Amortization: As companies grow, so do their fixed assets, leading to higher depreciation. This can eat into profit even if EBITDA is improving.

3. Exceptional Items: Sometimes, one-time costs such as legal settlements, restructuring expenses, or write-offs significantly impact net profit.

4. Tax Adjustments: An unfavorable tax outcome or deferred tax liabilities coming due could also reduce the profit after tax.

While the company hasn’t provided detailed explanations in the top-line numbers, the earnings release does raise valid concerns. The fall in EPS by 84% is particularly troubling for retail investors, especially those who expect stable returns from a consumer-focused brand.

What About the Sales Growth?

Sheela Foam’s revenue rose just 1% YoY. While not alarming, it points to saturation or stagnation in the market. There are a few plausible explanations:

• Market Maturity: Urban mattress markets may be nearing saturation, and rural demand has not picked up pace fast enough.

• Competitive Pressure: The unorganized segment still dominates a large part of the bedding and furniture market, placing pricing pressure on organized players.

• Consumer Discretionary Slowdown: As inflation persists and interest rates remain high, consumers may be postponing purchases of big-ticket items like mattresses.

In contrast to its sales, Sheela Foam’s market capitalization currently stands at ₹7,314 crore, and its Price-to-Earnings (PE) ratio is an eye-watering 129.3. At this level, investors are essentially paying a premium for growth that now seems to be stalling.

Is the PE Ratio Justified?

With a PE of 129.3, Sheela Foam is priced well above its industry average. For perspective, PE ratios in the consumer durables or home furnishings sectors generally hover between 25–45. A PE of over 100 demands consistently high earnings growth—which clearly is not visible in the current earnings report.

Such valuations are typically justified only for fast-growing tech companies or businesses with monopolistic moats and strong pricing power. In Sheela Foam’s case, while it is a leader in the branded mattress space, it does not currently show the financial muscle to support this level of valuation.

Long-Term Strategy and Expansion Plans

In recent years, Sheela Foam has taken bold steps to consolidate its position in the domestic market and expand globally. The company acquired a majority stake in Kurlon Enterprises and is also building its presence in Australia through its acquisition of Joyce Foam. These moves are expected to help scale operations and diversify revenue streams.

However, integration costs, increased overheads, and foreign currency fluctuations may be contributing to the short-term pain seen in the Q1 2026 results.

Investors will be keenly watching the management’s commentary in upcoming quarters to see how these strategic moves play out financially. Execution risk, post-merger synergies, and global logistics remain critical hurdles.

Analyst Sentiment: Mixed Outlook

Brokerage houses and market analysts are likely to remain cautious in the near term. The divergence between EBITDA growth and net profit decline complicates the investment thesis. Unless the company provides clarity on the reasons behind the profit erosion and outlines a recovery plan, stock performance could remain under pressure.

That said, the long-term fundamentals remain intact if Sheela Foam can stabilize its cost structure and reignite sales growth through innovation and deeper market penetration.

Should Investors Worry?

For long-term investors, a single quarter of weak profitability does not spell disaster, but it does demand scrutiny. Questions to consider:

• Is this a one-off event or the beginning of a declining trend?

• Are the acquisitions really adding value or just increasing complexity?

• Can the company regain its margin leadership?

If management can offer reassuring answers in the coming investor call or annual report, the stock may recover. But until then, the high valuation and deteriorating profits make this a high-risk holding in the short term.

Conclusion

Sheela Foam’s Q1 2026 earnings highlight a growing disconnect between operational efficiency and net profitability. While sales and EBITDA show moderate to positive trends, the net profit crash is a major concern that must be addressed transparently.

Investors and analysts alike will expect not only explanations but also clear steps to improve the bottom line. With a stretched valuation and flat revenue, Sheela Foam will need more than brand equity to retain market confidence going forward.

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FAQs

Q1. Why did Sheela Foam’s net profit fall in Q1 2026?
A: Despite a 1% rise in sales and 26% growth in EBITDA, Sheela Foam’s net profit dropped 64%, possibly due to increased interest costs, depreciation, exceptional items, or tax-related expenses.

Q2. Is Sheela Foam overvalued?
A: With a PE ratio of 129.3, Sheela Foam appears overvalued relative to peers. Its high valuation assumes strong growth, which is currently not visible.

Q3. What is the EPS reported for Q1 2026?
A: The Earnings Per Share (EPS) for Q1 2026 is ₹0.68, down sharply from ₹4.23 in Q1 2025.

Q4. Has the company expanded recently?
A: Yes, Sheela Foam has acquired Kurlon Enterprises in India and Joyce Foam in Australia, aiming for global expansion and product diversification.

Q5. Should I buy, sell, or hold Sheela Foam stock?
A: The current results warrant caution. It’s advisable to wait for further clarity from the company on profitability and growth trajectory before making investment decisions.

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About TOD News Desk: TOD News Desk is a team of dedicated digital journalists who specialize in breaking down complex news across business, tech, and markets into simple, insightful stories. Our mission is to help readers stay ahead with timely, accurate, and helpful updates that matter.

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