ICICI Securities's research report on Heritage Foods
Highlights: (1) In spite of unseasonal rains, the company reported strong revenue growth of 10.1% YoY. (2) EBITDA margin contracted to 6.5% in Q1FY26 vs 9.1% YoY due to revenue mix change partially led by early monsoon. (3) Value-added products’ (VAP) contribution to total sales (ex- ghee and butter) increased by 550bps. (4) The company launched Heritage Livo ‘Healthy-Living’ with renewed flavoured milk range (fortified with vitamins A & D) and high-protein yogurt range, targeting health-conscious consumers. (5) It has continued to focus on new product development, brand-building activities and distribution network expansion. We cut FY26-27E earnings by 7-9% to factor in Q1FY26 result and mid-single digit inflation in milk procurement prices. With 17% stock price increase over past three months,
Outlook
We downgrade the stock to HOLD (from Add) with DCF-based TP of INR 490 (implied target P/E of 17.5x FY27E).
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