Buy Heritage Foods; target Rs 235: Firstcall Research
Brokerage house Firstcall Research is bullish on Heritage Foods and has recommended buy rating on the stock with a target price of Rs 235 in its September 26, 2013 research report.
October 04, 2013 / 16:21 IST
Firstcall Research report on Heritage Foods
"Heritage Foods is the first South Indian dairy company to be listed on BSE & NSE. The company is a major player in organized retail in South India, has outperformed at the Sensex over the last one year. Net profit and EBDITA rose by 74 percent and 40 percent respectively in June quarter over the corresponding quarter in the previous year. Profit before tax also rose by whopping 94 percent in Q1 FY14. Although sales rose by a lackluster 5.20 percent, Heritage Foods reported high profit and operating margins by reducing debt and tightening overall expenditure. Expenditure increased by a mere 3.4 percent (YOY) in the current quarter. Finance costs fell by 35 percent from Rs. 523.61 mn in Q1 FY13 to Rs. 340.09 mn in Q1 FY14 as total debt was reduced by about 30 percent. Total debt fell to Rs. 981.80 in 2013 from Rs. 1405.168 mn in 2012. The company reduced long term debt and short term debt by 42 percent and 18.4 percent respectively. Thus as a result, debt equity ratio was reduced to 0.69 in 2013 from 1.51 in 2012. In today's slowing economy, where inflation is a persistent economic factor, high debt servicing is the biggest challenge faced by domestic Indian companies. Heritage Foods through debt reduction has brightened its future prospects in packaged foods industry."Outlook and Conclusion: "At the current market price of Rs. 215.60 the stock P/E ratio is at 4.30 x FY14E and 3.91 x FY15E respectively. Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.50.19 and Rs.55.21 respectively. Net Sales and Operating Profit of the company are expected to grow at a CAGR of 13 percent and 31 percent over 2012 to 2015E respectively. On the basis of EV/EBITDA, the stock trades at 2.56 x for FY14E and 2.28 x for FY15E. Price to Book Value of the stock is expected to be at 1.25 x and 0.95 x respectively for FY14E and FY15E. We expect the company to keep its growth story intact in the coming quarters also. We recommend 'BUY' in this particular scrip with a target price of Rs 235 for Medium to Long term investment," says Firstcall Research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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