Nuvama

We hosted top management of Heritage Foods (HTFL) at the Edelweiss India e-Conference 2022: The New Edge. Highlights: i) The company faced a severe margin pressure (down 360bp QoQ to 6.1%) in the wake of a cyclone in

Result Update

Parag Milk Foods Ltd

Dairy

Sales uptick; margins inline

Parag Milk Foods’ (Parag) Q3FY22 revenue grew 14% YoY on a low base of 22% decline, as core categories reverted to pre-pandemic levels growing 9% YoY in Q3 FY22. EBITDA grew 40% YoY (in line with estimates) led by cost

Elevated procurement causes miss

Heritage Foods (HTFL) reported sales growth of 10% YoY, despite cyclones in key end-user markets. This was led by dairy sales, which grew 12% YoY and value-added dairy products (VADP) which grew 21% YoY. However, rising

Sales uptick; margins better

Parag Milk Foods (Parag) posted a revenue uptick of 7% YoY in Q2FY22 off a low base (-22% YoY) as core categories reverted to pre-pandemic levels, up 23% YoY in H1. EBITDA grew 28% YoY (18% above estimate) on lower

Heritage Foods (HTFL) reported double-digit sales growth of 10% YoY, despite heavy rainfall in key end-user markets. Procurement too grew 8% YoY. This was led by dairy sales, which grew 11% YoY and value-added dairy

Sustainable uptick awaited

Parag Milk Foods’ (Parag) Q1FY22 revenue grew in line--1% YoY on a low base of 31% decline--as milk sales picked up, while out-of-home (OOH) and HORECA remained slow. EBITDA grew 51% YoY (25% above estimate) with a dip

Strong strategic moves

Heritage Foods (HTFL) reported largely in line sales with 1% YoY and 5% QoQ growth. Dairy sales grew 3% YoY led by value-added dairy products (VADP) sales growth of 11% YoY as curd sales also jumped 12% YoY. EBITDA

Recovery lagging peers

Parag Milk Foods’ (Parag) Q4FY21 revenue fell 19% YoY (13% below estimate) due to dip in milk sales as pick-up in HORECA and modern trade remained slow. EBITDA slid 54% YoY (46% below estimate) due to lower sales and 22%

Spreads dip sequentially

Heritage Foods (HTFL) reported sales in line, but EBITDA growth of 74% missed estimate by 20%. This was led by gross margin decline of ~504bps QoQ to 23.2% with 7% QoQ increase in procurement cost. Sales fell 5% YoY, but

Recovery still distant

Parag Milk Foods’ (Parag) Q3FY21 revenue dipped 25% YoY (15% below estimate) due to decline in milk sales as pick-up in modern trade remained slow. However, value-added sales picked up slightly as the company shifted

Strong spreads sustain

Heritage Foods (HTFL) reported another quarter of strong EBITDA (up 2.3x YoY), 20% ahead of our estimate. This was led by gross margin expansion of ~952bps YoY to 28.3% as higher spreads sustained, procurement cost

Future stake sale: Overhang eliminated

Heritage Foods (HTFL) has reported the sale of its entire stake in Future Retail (FRL) via open market for a net consideration of INR1,319mn. The sale has been executed at an average price of INR74/share and the funds

Modern trade, HORECA sour recovery

Parag Milk Foods (Parag) reported a 22% YoY plunge in Q2FY21 revenue (in line with our estimate) owing to lower milk sales as the pickup in modern trade stayed slow while HORECA kept value-added sales subdued. Gross

Core: Structurally and cyclically strong

Heritage Foods (HTFL) reported a strong 81% EBITDA beat (up 4.0x YoY). This was led by gross margin expansion of ~1,205bps YoY (up 654bps QoQ) to 29% owing to higher spreads with declining procurement cost and sustained

Stellar EBITDA performance

Heritage Foods (HTFL) reported a strong beat on EBITDA (up 296% YoY), 81% ahead of estimates. This was led by gross margin expansion of ~1,205 bps YoY, 654 bps QoQ, as benefits of lower milk prices flowed, leading to

Parag Milk Foods - Result Update Q1FY21 - Out-of-home, Horeca sour recovery

Heritage Foods - Stable core: Structurally and cyclically strong; company update; Buy

Heritage Foods (HTFL IN, INR 334, Buy) Heritage Foods (HFL) has doubled from its March low (down 58% from its January-2018-high). FY20 was a challenging year owing to a harsh season, which dragged down core

Heritage Foods - Result Update Q1FY21 - The beginning of dawn

Heritage Foods’ (HFL) Q1FY21 EBITDA jumped 25% YoY, surpassing our estimate by 30%. Sales declined 11% YoY (8% below estimate) primarily due to 20% dip in milk volumes sold and 34% fall in value-added (VADP) sales.

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