Heritage Foods Ltd. share price target

Wipro’s IT Services revenue dipped 2.3% QoQ USD in Q2FY24. The slip was much steeper than our/consensus’ expectations of -0.5%. Revenue growth came in at the lower-end of Wipro’s guidance for Q2FY24.

While Heritage reported YoY EBITDA margin expansion of 145bps, we note its EBITDA margin contracted sequentially. It indicates the impact of inflation in milk prices continued to impact Q1FY24 QoQ. However, we model milk prices to deflate in rest of FY24 with normal monsoon and commencement of flush season in Q3FY24.

Heritage reported EBITDA margin expansion of 60bps led by lower other expenditure (lower ad-spend in our view) and operating leverage. We model EBITDA margin recovery to continue even in FY24 with likely correction in milk procurement prices.

Milk procurement prices continue to remain high due to (1) steep increase in RM prices, (2) higher SMP prices and (3) muted flush season. We note delayed price hikes had impacted margins in H1FY23 and similar story continues in H2FY23. Heritage is likely to report lowest EBITDA margin of 4.5% in FY23 in past eight years in our view. We model the margins to recover only in FY24.

While 19% increase in milk procurement prices impacted EBITDA margin.

Takeaways from Q4FY22 and the company's management call: (1) Revenue grew 12.4% YoY driven by strong volume growth in dairy segment, (2) gross margin declined 304bps YoY due to higher milk procurement prices but limited price hikes, and (3) steady launch of new products continued during the quarter. Steady value migration from co-operatives and unorganized players to private players is likely to benefit Heritage.

Heritage posted strong 21% growth in its earnings driven by margin improvement across all its segments.

We met the management of Heritage Foods and also visited the plant and Heritage parlour to get an update on the market

Heritage foods Ltd posted its Q1FY19 which was below our expectation. Net revenue stood at INR 6.4 Bn (+4.1% YoY), as against our estimates of INR 7 Bn, mainly due to a recovery in demand resulting from reduced prices for dairy products. EBIDTA was at INR 460 Mn (+70.9% YoY), with OPM at 7.2% (+280 bps YoY). Reduction in milk prices and lower operating expenses has resulted in better margins. PAT for Q1FY19 stood at INR 207.9 Mn (+12% YoY), with NPM at 3.2% (+23 bps YoY). Higher tax out go (+88% YoY) and a...

VADP drives revenue growth: Heritage's consolidated revenue grew by 14%, 7% below our estimate. The Dairy business grew by 14% on the back of 17% growth in VADP (22% of the Dairy business). In VADP, the Curd business (82% of the VADP business) grew by 21% to Rs1bn. The Liquid Milk business (78% of the Dairy business) grew by 14%, largely driven by the Reliance Dairy acquisition. We believe that Heritage's organic growth (exReliance Dairy) grew by ~5%. Milk procurement increased by 24% to 13.2 llpd due to inorganic growth. The management continues to focus on VADP and aspires to increase its contribution to 40% (from 22% in FY18) by 2022E. Improving operational efficiency of Reliance Dairy drives margins: Gross margin...

Heritage posted a mixed set of results for Q2FY18; wherein despite strong revenue growth at 31% yoy, the operating profit was down 44% yoy on account of (a) higher milk procurement...

Heritage Foods posted weak performance for Q1FY18 ; on account of integration and consolidation of Reliance Dairy's performance into the business. The top line grew by 32% YoY; led by...

Heritage Foods posted weak performance for Q4FY17 with consolidated revenue growth of 11%, led by strong growth in retail (+28% yoy), while the Dairy business performance was muted.

Our experts analyse ??how Heritage foods is moving beyond South India and establishing itself as a leading dairy player across the country.

Heritage Foods (Heritage) is a leading dairy player with strong presence in South market, wherein it has cornered ~10-12% of the organised market pie.

Heritage Foods: Robust Milk Procurement Supply Chain; Focus to be a pure play dairy company is a positive; Value Added products will aid growth and margin expansion; Premium valuations due to Superior return ratios; Indiabulls Housing Finance: Poised for faster growth v/s the industry; Scope to brin..

Heritage Food is one the leading private dairy company of South India. It is headquartered at Hyderabad, with a extensive presence across 10 states, providing high quality & nutritious dairy products to customers. It operates in five divisions namely: Dairy, Retail, Agri, Bakery & Renewable energy. Company operates 14 processing plants, 140 bulk coolers & chilling plants, 1515 dairy parlours & 112 retail stores. Company's sales is facilitated by 26 sales offices, 5900...

Heritage Foods Limited is engaged in dairy, retail, agri, and bakery businesses in India. The company's Dairy division is involved in procuring, manufacturing, packing, and distributing milk and milk products whereas the Retail division operates a chain of retail stores that offer fresh fruits and vegetables, grocery, processed food etc.