POSSIBLE MULTIBAGGER STOCK: HERITAGE FOODS LTD
In our Saturday Multi-bagger Series, our today’s pick is HERITAGE FOODS LTD.
CMP – INR 230.25
MCAP – INR 1069 CR
1 YR RETN: -51%
Heritage Foods Ltd, Headquartered in Hyderabad was established in the year 1992. The company is in the business of Dairy products like – Milk, Curd, Ice-cream, buttermilk, lassi, ice-cream, paneer, ghee, table butter, cooking butter, milk powder, flavoured milk, UHT milk and dairy whitener & Renewable Energy. Further, in the year 1994, HFL went public and was oversubscribed 54 times. Since then the company has created value for shareholders
The company presently has a chilling capacity of 1.95 million litres per day, Processing Capacity of 2.57 million litres per day and Packaging Capacity of 1.71 million litres per day. It has a significant presence in the states of Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, Maharastra, Odisha, NCR Delhi, Haryana, Rajasthan, Punjab, Uttarakhand, Himachal Pradesh, Uttar Pradesh & Madhya Pradesh. The company is currently operating 125000 retail outlets through its franchise. The annual turnover of Heritage Foods crossed INR 2482 crores in the financial year 2018-19. The company has stated its mission to be a nationally recognized brand for Healthy and Fresh products with a revenue of INR 6000 Crore by 2024. A sale of Rs.6000 Cr is little ambitious but still achievable as people are paying attention to their health more than ever now and the company is very well equipped with facilities to ramp up its production.
Let us now understand financials of the company through bullet points:
- Scrip Name: Heritage Foods Ltd
- CMP: Rs 230.25, MCap: Rs 1068.31 Crore, 1 year return (-51.58%)
- Sale of the company grew from Rs 2342 Cr in 2017-18 to Rs 2613 Cr in 2018-19.
- Profit grew from Rs 60.38 Cr to Rs 83.44 Cr as at 31st March 19.
- ROE has increased to 10.36 from 7.72 & RoCE is increased to 11.59 from 7.72.
RoAhas also increased to 5.23 from 3.58.
- The company has a DER of 0.31 which means the company has an equity of Rs 100 for every debt of Rs 31.
- The company’s PE is 14.37 against industry PE of 57.57. It shows that the company can grow 4 times from here to catch up with others.
- Heritage Foods had a debt of Rs 261.00 Cr as on March 20. It also has a cash reserve of Rs 74.00 Cr which makes it net debt at Rs 186 Crore. While this seems a lot, when we analyse the cash flow situation of the company, we find that the company has been able to generate cash out of its past investment. There is a net EBITDA growth of approx. 48% in the last year. There has been a net cash outflow for the company and if this trend continues, the company will not have any problem in servicing debts. Debt is a great tool to increase business and the company is making the best use of its debt.
- The company can also think of raising its capital but it will be great if it can manage its debt and expansion without dilution.
Keeping all the above 10 reasons in mind, we believe that the company has tremendous growth potential and can grow to become one of the leading dairy companies of India. It is one of those few small-cap companies where MFs are still raising stake. Ace investor Mr Vijay Kedia has also purchased shares in the company however it is still below 01% for the first time.
Hence, we are of the opinion that the company has the capacity to give multi-fold return in coming years.
THIS STUDY HAS BEEN CONDUCTED FOR EDUCATIONAL PURPOSE ONLY & THIS IS NOT AT ALL A RECOMMENDATION. PLEASE DO YOUR OWN RESEARCH BEFORE INVESTING. WE ARE NOT SEBI REGISTERED & NOT AN ADVISORY FIRM.
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