🧭 At a Glance
- Incorporated: 1992 (heritage brand since then!)
- Market Cap: ₹4,232 Cr
- CMP: ₹456 (16 Jun 2025)
- P/E: 21.7× | P/B: 4.3×
- ROCE: 27.1% | ROE: 21.9%
- Debt: Low—net borrowings ₹174 Cr vs. cash flows ₹214 Cr in FY25
Why it matters: Heritage Foods processes 2.78 mn L/day across dairy, renewables and animal feed. With 418+ SKUs, it commands South India’s dairy lanes—delivering milk, curd, butter, paneer, juices, ice-cream, and even wind power. Let’s churn through the numbers.
1️⃣ Business Segments: The Milky Way
| Segment | FY25 Sales Share | Notes |
|---|---|---|
| Dairy Products | ~80% | Fluid milk, ghee, paneer, curd, ice cream, flavored milk—via distributors & parlours |
| Renewable Energy | ~10% | 56 MW solar + wind capacity; captive + merchant sales |
| Animal Feed | ~10% | Cattle feed, poultry feed—using by-products from dairy |
Key takeaway: Dairy is the cash cow; renewables and feed diversify revenue and cushion margins during milk-price volatility.
2️⃣ Five-Year Financial Milestones
📊 Consolidated P&L (₹ Cr)
| Year → | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Sales | 2,681 | 3,241 | 3,794 | 4,135 | 4,135 |
| PAT | 96 | 58 | 107 | 188 | 188 |
| OPM | 7% | 4% | 5% | 8% | 8% |
| EPS (₹) | 10.41 | 6.25 | 11.48 | 20.29 | 20.29 |
- Sales CAGR (5 yr): ≈9%
- Profit CAGR (5 yr): ≈26%
- Margins: OPM improved from 4% (FY22) to 8% (FY25) through premiumization and energy cost savings.
Insight: Resilient topline growth with margin expansion post-COVID disruption (OPM nearly doubled vs. FY22).
3️⃣ Quarterly Performance: Recent Trends
| Quarter | Sales ₹ Cr | PAT ₹ Cr | OPM | EPS ₹ |
|---|---|---|---|---|
| Q1 FY25 | 951 | 40 | 7% | 4.36 |
| Q2 FY25 | 1,033 | 58 | 9% | 6.30 |
| Q3 FY25 | 1,020 | 49 | 8% | 5.24 |
| Q4 FY25 | 1,048 | 38 | 7% | 4.11 |
- Q2 peak: festive season and chilled-weather ice-cream drove 9% OPM.
- Q4 dip: summer months increase raw-milk costs; feed segment steadies margins.
4️⃣ Balance Sheet & Cash Flow: Cream-Rising Capacity
🔑 Key Metrics (Mar 2025)
- Equity + Reserves: ₹926 Cr
- Borrowings: ₹174 Cr (D/E ~0.19×; down from ₹132 Cr in FY24)
- Fixed Assets + CWIP: ₹816 Cr (processing plants, parlours, renewables)
- Operating CF: ₹214 Cr
- Capex: –₹229 Cr (plant expansions, solar/wind farms)
- Free CF: ~₹(15) Cr (seasonal working-cap increases)
Commentary: Strong OCF covers capex; low leverage leaves room for acquisitions or further renewables growth.
5️⃣ Working Capital: Keeping the Udder Flowing
| Metric | FY23 | FY24 | FY25 |
|---|---|---|---|
| Debtor Days | 3 | 3 | 3 |
| Inventory Days | 38 | 33 | 42 |
| Payables Days | 9 | 18 | 20 |
| W-cap Cycle | 31 | 18 | 25 |
- Ultra-low receivables (3 days) thanks to distributor models.
- Rising inventory in feed & renewable spare parts; payables extended to ~20 days.
6️⃣ KMP – The Herd Leaders
| Name | Role |
|---|---|
| Mr. Nara Chandrababu Naidu | Chairman (Promoter) |
| Mr. V. S. Rangaswamy | Managing Director |
| Ms. Divya D. Tummala | Chief Financial Officer |
| Dr. Anil Kumar Gupta | Head—Dairy R&D & Quality |
| Mr. S. Ramakrishna | VP—Renewable Energy Operations |
Governance note: Promoter-led with professional management in finance, R&D and operations.
7️⃣ SWOT Analysis: A Balanced Board
✅ Strengths
- Scale advantage in South India—2.78 mn L/day capacity
- Product diversity: 418+ SKUs across milk, value-adds, and feed
- Margin tailwinds: renewable energy offsets power costs
- Efficient working capital keeps cash conversion lean
❌ Weaknesses
- Geographic concentration: heavy reliance on Southern states
- Thin margins vs. branded FMCG peers (OPM ~8%)
- Seasonal volatility in milk supply & prices
🔮 Opportunities
- Value-added dairy: flavored milk, probiotic drinks, cheese
- Retail parlour expansion: premium ice-cream cafés in metros
- Renewables growth: add 50+ MW solar/wind for captive & merchant sales
- Animal-nutrition products: expanding feed portfolio with premixes
⚠️ Threats
- Milk price inflation: input cost passes slowly to end-consumer
- Competition: Amul & Hatsun Agro’s pan-India reach
- Regulatory risks: changes in dairy subsidies and MSPs
8️⃣ Valuation & Fair Value
1. P/E Multiple
- FY25 EPS: ₹20.29
- Fair P/E: 15–18× (mid-cap FMCG/dairy peers)
- FV Range: ₹305 – ₹365
2. Sum-of-Parts (SOTP)
| Business | FY25 PAT (₹ Cr) | Target P/E | Value (₹ Cr) |
|---|---|---|---|
| Dairy Products (80%) | 150 | 18× | 2,700 |
| Renewables (10%) | 19 | 7× | 133 |
| Animal Feed (10%) | 19 | 8× | 152 |
| Total EV | 188 | — | 2,985 |
| Net Debt | –40 | — | –40 |
| Equity Value | — | — | 2,945 |
| Shares (Cr) | — | — | 65 |
| FV/Share | — | — | ₹45 |
Consensus FV: ₹345 (P/E) – ₹45 ? Oops—decimal slip! SOTP gives ₹45/share? That’s clearly off. Adjust multiples: dairy should earn ~₹150 Cr, P/E 18→₹2,700 Cr; minus ₹40 Cr debt = ₹2,660 Cr equity; ₹2,660 Cr / 65 Cr shares = ₹409/share. So SOTP FV ≈ ₹400–420.
Final Fair Value Range: ₹360 – ₹420 vs CMP ₹456 → premium valuation, ripe for correction unless high-growth segments fire on all cylinders.
TL;DR 🥛
- Leader in South Indian dairy with 2.78 mn L/day processing and 418+ SKUs.
- FY21–25 sales: ₹2,681 Cr → ₹4,135 Cr (CAGR ~9%); PAT: ₹96 Cr → ₹188 Cr (CAGR ~26%).
- Margins: OPM doubled from 4% to 8%, aided by value-adds and renewable energy.
- Balance sheet: Minimal debt (₹174 Cr), strong OCF ₹214 Cr, capex ₹229 Cr.
- Working capital: Ultra-low receivables, manageable inventory, longer payables.
- Valuation: P/E ~21.7×; fair value ~₹360–420, implying current premium.
- Catalysts: Value-added product expansion, renewables scale-up, parlour network.
- Risks: Milk-price volatility, regional concentration, intense competition.
Bottom line: Heritage Foods offers resilient dairy growth and margin tailwinds—yet at a premium multiple, wait for a dip or earnings beat to justify the valuation.
Tags: HeritageFoods Recap, Dairy Stocks India, Renewable Energy, Animal Feed, FMCG Midcap, OPM Expansion, South India Dairy, SOTP Valuation, Milk Price Risk, EduInvesting
