Heritage Foods Q3 Results Review - Weak Flush Season Impacts Margins; Model Recovery In FY24: ICICI Securities
Heritage Foods is likely to report lowest Ebitda margin of 4.5% in FY23 in past eight years in our view.
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ICICI Securities Report
Milk procurement prices continue to remain high due to steep increase in raw material prices, higher skimmed milk powder prices and muted flush season. We note delayed price hikes had impacted margins in H1 FY23 and similar story continues in H2 FY23.
Heritage Foods Ltd. is likely to report lowest Ebitda margin of 4.5% in FY23 in past eight years in our view. We model the margins to recover only in FY24.
However, due to price hikes and higher hotel-restaurant-cafe and out-of-home sales, revenue growth of the company is likely to remain in mid-high teens in Q4 FY23 as well as FY24.
We model Heritage Foods to report profit after tax compound annual growth rate of 23.8% over FY22-FY25E with: mid-single-digit growth in milk procurement, and steady increase in the share of value added product portfolio.
We cut our earnings estimates due to delay in price hikes and impact on milk procurement prices due to muted flush season.
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