Bullish on Heritage Foods, Lancor Holdings: Ashish Chugh

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Bullish on Heritage Foods, Lancor Holdings: Ashish Chugh

Investment Analyst Ashish Chugh is bullish on Heritage Foods and Lancor Holdings.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Heritage Foods BSE | NSE 31/05/12 Are Mutual Funds betting on Heritage Foods? Other Stocks in this news Lancor Holdings |

Investment Analyst Ashish Chugh is bullish on Heritage Foods and Lancor Holdings.

Andhra-based Heritage Foods was founded by N Chandra Babu Naidu. The company operates in three main segments -- dairy, retail, and agriculture. Chugh said the dairy business is the most profitable business of the company. "It has the infrastructure to procure and process seven lakh litres of milk. The company sells products through 1,800 franchisees or outlets. Its milk products have a market presence in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, and Maharashtra. The dairy business posted a profit of Rs 28 crore for the nine month period of FY09."

Heritage Foods' retail business has a presence in Bangalore, Chennai, and Hyderabad, he said. "The company has a total of 80 outlets. This segment incurred losses of Rs 35 crore in the nine month period of FY09." 

In agri, Chugh said, the company has a presence primarily in contract farming. "It has integrated agricultural operations in Chittoor and Medak districts which is the backbone to its retail operations."

Speaking on the investment rationale, Chugh said, the company's business is being restructure. "The loss making retail division is being transferred to a new subsidiary. The management is also looking for a buyer for the retail business. Assuming that the retail business is sold, the company should start reporting profits."

He expects the dairy business profitability to be about Rs 60-70 crore from FY10 onwards. 

This company has also caught the fancy of institutional investors like Kotak India Focus Fund and George Soros which have picked up stake at about Rs 200 per share. "The management too has increased its stake near the market price of Rs 250 per share," he added.

Lancor Holdings is a Chennai-based real estate company, which operates in the residential as well as commercial segment. Chugh said the company has six ongoing projects in Chennai.

Commenting on the investment rationale, he stated that Lancor is the only realty company to have improved sales and profitability significantly in a turbulent environment. "The company has history of completing most projects as per schedules. It has regular rental income of Rs 4 crore on property worth about Rs 50 crore. The management expects profit of Rs 35-40 crore in FY10. At the current market price, the stock is available at less than three times FY09 EPS."

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