Hatsun Agro - In Value Creation Zone: ICICI Securities

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ICICI Securities Report

Hatsun Agro Product Ltd. made material investments over FY20–24 that are likely to result in strong value creation over FY24–26E and beyond. We note:

1. Packaged milk realisation is ~20% higher than milk variants of co-operatives. Some peers also offer higher trade incentives than Hatsun. Also, trade pays in advance to Hatsun (before delivery of milk), resulting in negligible debtors – indicates consumers perceive Hatsun's milk variants as a ‘value-added product'.

2. Govindpur (Telangana) plant's commencement and investments in HAP Daily (freezer and other furniture and furnishings), reimbursement of electricity bills and rent and investment in ice cream storage units offer multiple competitive advantages to Hatsun versus. peers.

3. SMP accumulation is a prudent move, as it could protect profitability during milk inflation (likely in FY26 in our view).

4. As FY25–26E depreciation will likely be less than capex and sale of SMP will also release resources, we model material debt and interest cost reduction by FY26E.

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