Heritage Foods gross margin expected to reach 23%

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Heritage Foods posted net total sales of Rs 122.63 crore vs Rs 83 crore increase of 47%.Their EBIDTA stood at Rs 54 lakhs. Company's Net Debt is Rs 85 crore, Cash in hand is Rs 20 crore.

Company arranged for a concall to discuss on their their further guidance and future prospects.

Here are the key take aways of the concall.......

• Their debt to equity ratio is 1.21:1. Its differential rate or cost of borrowing is around 10.65% to 10.70%. Heritage Foods gross margin is 15.5 to 17% and is expected to reach 23%
• Company is into Agriculture, retail and dairy business.
• Management expects goood volumes and growth in their dairy and agriculture business.Company has 24 stores in India.(Hyderabad, Banglore and Chennai respectively).It plans to open 15 more stores in the current year.
• Management says Retail division is witnessing pressure on margins due to pre operative expenditure and is not expected to reach the optimum level in this quarter.
• Company Capital Employed in their Retail business is around Rs 31 crore, and total capital employed of around Rs 131 crore for the whole pack. Their retail turnover is Rs14.1 crore and is expected to reach Rs 20 to 22 crore this quarter.Operating profit from retail division is Rs 7.47 crore
• Margins from agri and retail is above 30%.  Margins from Agriculture business is aroud 10%. In agri business comapany has capacity of 100 tonnes per day.
• Company has a average inventory level of 25 days. their current inventory level is more than 25 days due to lack of stores and robust demand. Management says inventory level is expected to to be less than 10 days after opening of new stores.Company has already opened 9 stores in hyderabad, out of which 5 have cross cash break even on productivity numbers.
• Heritage Foods is in talks with Nestle to expand their business. Nestle is going to procure milk from Heritage Foods.Management further says Heritage Foods holds 51% in Heritage infrastructure and plans to develop land which it owns in near future.

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