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ICICI Securities Report
While Heritage Foods Ltd. reported YoY Ebitda margin expansion of 145 basis points, we note its Ebitda margin contracted sequentially.
It indicates the impact of inflation in milk prices continued to impact Q1 FY24 QoQ. However, we model milk prices to deflate in rest of FY24 with normal monsoon and commencement of flush season in Q3 FY24.
Improvement in profitability of cattle feed segment will also likely lead to better margins ahead.
Heritage Foods has continued to invest in expanding its competitive advantages with-
distribution expansion of 20,000 outlets and
steady launches of 10 differentiated products.
Factoring in weaker-than-expected Q1 FY24, we cut FY24E earnings by 9.2% but maintain 'Buy' rating with discounted cash flow-based revised target price of Rs 290 (implied price/earning of 13.5 times FY25E; earlier target price: Rs 235).
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