Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

Heritage Foods - Lower procurement prices leading to highest EBITDA margin in past decade - ICICI Securities

Posted On: 2020-10-29 05:46:18


Three highlights from Q2FY21: (1) EBITDA margin expanded 1110bps due to reduction in milk procurement prices. We expect milk procurement prices to be lower even in H2FY21 due to commencement of flush season, (2) The revenue decline of 10.2% was largely attributable to reduction in HoReCa sales and lower out-of-home consumption. Gradual re-opening up of economy will steadily lead to higher revenues, (3) The company has initiated some cost saving measures which has also helped to improve margins. We believe some cost saving measures are structural in nature. We model Heritage to report PAT CAGR of 63% over FY20-FY22 with improvement in core return ratios. Maintain BUY with a target price of Rs400 (12x FY22E; Earlier TP-Rs360).

- Revenue impacted due to decline in HoReCa sales: Heritage reported revenue decline of 10.2%, YoY. The liquid milk volume declined 20.3%. We believe Heritage generates ~15% revenues from HoReCa and institutions. Decline in off-take by HoReCa resulted in lower liquid milk revenues. The revenues of Value-added products declined 21% due to (1) decline in ice cream revenues, (2) lower HoReCa sales and (3) reduction in out-of-home consumption.

- EBITDA margin expansion due to better realisations and lower RM prices: EBITDA margin expanded 1110bps, YoY, due to (1) Carry-over of price hikes (~13%), (2) lower procurement prices and (3) lower other expenditure (Some cost saving measures & likely lower ad-spend). Milk realisation increased by Rs5.4/ltr to Rs 46.4/ltr in Q2FY21 from Rs41/ltr in Q2FY20. PAT was up 395.6% YoY.

- Correction in milk procurement prices: Milk procurement prices started correcting post lockdown due to lower demand of milk. Lower off-take by HoReCa and lower sales of value added products further has impacted milk demand. The milk prices are expected to be lower in H2FY21 due to (1) commencement of flush season and (2) high SMP inventory in India. The correction in milk procurement price will lead to better margins for rest of FY21.

- Decline in revenues of value added products to continue: While revenues of liquid milk may recover in H2FY21, value added products are likely to report revenue decline even in H2FY21. We believe there is likely impact on milk consumption/ supply chain due to floods in Hyderabad in Q3FY21. With gradual re-opening of economy, we expect the demand for milk and milk products to recover.

- Retain BUY: We model Heritage to report revenue and PAT CAGRs of 4.8% and 63%, respectively, over FY20-FY22. Core return ratios are expected to improve over the same timeframe. We have valued the stock as per DCF methodology at Rs400 (Implied P/E 12x FY22E).

Shares of Heritage Foods Limited was last trading in BSE at Rs.304.75 as compared to the previous close of Rs. 304.9. The total number of shares traded during the day was 1671 in over 233 trades.

The stock hit an intraday high of Rs. 313.05 and intraday low of 300.5. The net turnover during the day was Rs. 512995.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Auto Sector - Monthly Volume Round-up - Nov 20 - Reliance Securities

What do brokerages say on Burger King India Limited's IPO?

The Phoenix Mills - Potential fund infusion may usher in growth - ICICI Securities

Godrej Agrovet - Beneficiary of 60% increase in palm oil prices - ICICI Securities

Automobiles (wholesale) - Wholesale dispatches rise amidst modest retail trends - ICICI Securities

Oil & Gas - Sector Update - Dec 2020 - ICICI Direct

Phoenix Mills (Buy): Asset monetisation at favourable terms... - ICICI Direct

Aditya Makharia's views on November Auto Sales Number for November 2020 - HDFC Securities

Burger King India - IPO Review - ICICI Direct

Quant Pick - LIC Housing Finance - ICICI Direct

Tech Mahindra - Analyst Meet Update - ICICI Direct

Gladiator Stocks - Crompton Greaves Consumer Electricals - ICICI Direct

Derivatives Monthly Outlook - Nifty support at 12800 for ongoing momentum...

Quant Pick - Sun Pharmaceuticals - ICICI Direct

Monetary Policy - Expectation from YES Securities

Sector Update on Asset Management Companies - Subdued but improvement expected - HDFC Securities

Pre Monetary Policy View - Dec, 2020 - Lakshmi Iyer, President and CIO (Debt) & Head Products, Kotak Mutual Fund

Maintain REDUCE on Siemens - Smart recovery priced in - HDFC Securities

Banking Sector Credit Trends - Growth continues to moderate - HDFC Securities

Q2 FY21 GDP: Light at the end of the tunnel - YES Securities

Siemens - Q4 FY20 Result Update - YES Securities

Super action in Home Loans - SBIN, ICICIBC, AXSB, HDFC and LICHF gaining share - YES Securities

Polymer price tracker - Dec 1, 2020 - PVC prices continue to tread higher - ICICI Securities

Bajaj Finance - Company Update - Dec 2020 - ICICI Direct

Siemens Ltd - Healthy revival in orders and margins - ICICI Securities

Covid Recovery Pulse - Nov 30, 2020 - Festive positivity continues in auto retails, e-way bill generation improves...

Derivatives Weekly View (November 27): Momentum expected to continue in broader markets with Nifty support at 12800...

Derivatives Strategy - Positional Option - ICICI Direct

Preview on RBI Monetary Policy - December 2020 - Shanti Ekambaram, Group President - Consumer Banking, Kotak Mahindra Bank

10 things you should know about Burger King India Limited

Views of HDFC Securities and Acuité Ratings & Research on Q2FY21 GDP Numbers

Rollover Report for November 2020 - December 2020: Angel Broking

Initiating Coverage on Godrej Properties - The housing factory - HDFC Securities

Burger King IPO - Angel Broking

Rollover Analysis - Record foreign inflows pushes Nifty to 13k - YES Securities

Ceramic tiles industry - Market share gains sustain for top branded players - ICICI Securities

Gas sector - CGD: Competition to hit margins, volumes and lead to derating - ICICI Securities

Cement - Prices resilient in Q3; consensus upgrades to continue - ICICI Securities

Specialty chemicals - Price trend in Sep-20 - ICICI Securities

Timken India - Q2FY21 Company Update - ICICI Direct

Upgrade in target price of IDFC First Bank - Angel Broking

Laurus Labs stake acquisition in Richore Lifesciences - Angel Broking

Shares of Lakshmi Vilas Bank (LVB) suspended from trading - Angel Broking

Initiating Coverage on Sundram Fasteners - Fastening growth - HDFC Securities

Astral Poly Technik - Scalability to further improve with storage tanks foray - ICICI Securities

Vardhman Special Steel - Q2FY21 Company Update - ICICI Direct

Initiating Coverage - Advanced Enzyme Technologies - ICICI Direct

L&T - Secures Large Contract - Nov 25, 2020 - Angel Broking

Alembic Pharmaceuticals - Tentative Approval for JV - Angel Broking

Drug launch by Lupin - Tacrolimus Capsules - Angel Broking



Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019