Views on Heritage Foods 4QFY2014 results - Angel Broking

Views of Ms. Twinkle Gosar (Equity Research Associates-Mid Caps, Angel Broking) on Heritage Foods 4QFY2014 results:

"Heritage Foods Ltd. (HFL) reported disappointing operational performance for 4QFY2014. Top line surged by 11.0% yoy to Rs. 438cr, in line with our expectation. However, EBITDA plunged by 32.3% yoy to Rs. 18cr way lower than our estimate of Rs. 25cr. EBITDA margin dip by 267 basis point yoy to 4.2% which is attributable mainly to rise of 458bp in raw material cost as percentage of sales. Moreover, increased interest cost of 7.0% further dent the bottom line leading to dip of 53.4% yoy to Rs. 7cr against our estimate of Rs. 13cr.

On segmental front, Dairy segment grew by 9.4% yoy to Rs. 334cr (73.4% of total sales) while retail segment registered growth of 12.5% yoy to Rs. 100cr (22.0% of total sales). However, Agri segment registered robust growth of 81.1% yoy to Rs. 17cr while bakery segment dip by 10.3% yoy. EBIT for dairy segment dip by 399bp to 5.4% while retail and agri segment reported reduction in EBIT losses by 564bp and 398bp to 3.1% and 4.9% respectively.

For FY2014, top-line registered marginal growth of 7.5% to Rs. 1,722cr, driven by robust growth of 67.8% in Agri segment and 15.7% in Retail segment. Dairy segment which contributes ~74% to total revenue however grew by mere 3.4%. EBITDA for the year dip by 6.2% to Rs. 95cr while margins at 5.5%, 80bp lower, mainly due to increased raw material and employee cost. EBIT margin for Dairy segment dip by 112bp to 7.8% while all other 3 segments reported loss, though, relatively lower vis-à-vis FY2013. Poor operating performance lead to dip in bottom line by 9.6% to Rs. 45cr.

Despite poor quarterly performance, we expect the dairy segment to improve going forward owing to the geographical expansion strategy of the company, following which the company plans to set up plant in Delhi. However, the clarity on the same is awaited until which we recommend Neutral rating on the stock."

Shares of Heritage Foods Limited was last trading in BSE at Rs.336.25 as compared to the previous close of Rs. 322.55. The total number of shares traded during the day was 38117 in over 3145 trades.

The stock hit an intraday high of Rs. 347.55 and intraday low of 321. The net turnover during the day was Rs. 12827684.

Source : Equity Bulls

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