Heritage Foods Limited
Know the Company
Heritage Foods Ltd (HFL), the second-largest private dairy company in India, established in 1992 in Andhra Pradesh by Shri N. Chandrababu Naidu, a prominent political leader and the current Chief Minister of Andhra Pradesh. The company offers a diverse range of milk products under the ‘Heritage’ brand, including fresh milk, paneer, ghee, buttermilk, curd, UHT milk, lassi, flavored milk, frozen desserts, and ice creams, etc. HFL has expanded its portfolio to include a range of value-added dairy products and maintains a strong presence in major consumption markets. Apart from the dairy business, the company is involved in the cattle feed business through its subsidiary, Heritage Nutrivet Limited (HNL), and operates a small renewable energy unit.
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HFL has a strong presence in Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu, with nearly three-fourths of the company’s revenue coming from these four states. The company provides high-quality milk products to over 1.5 million consumers through its extensive distribution network across 12 states in India. Currently, HFL has a significant milk processing capacity of 2.78 million liters per day and operates 18 milk processing facilities and 203 milk chilling units nationwide to ensure the quality and availability of its products. The company runs over 850 Heritage Parlours, making its products easily accessible to retail consumers in its markets.
Strengths
With over three decades of experience in the dairy business, HFL has developed strong competencies and capacities that position the company for sustainable growth and value creation. Known for its high-quality dairy products, which have become household staples, the company’s major strengths include a robust milk collection and distribution network, a large and expanding portfolio of value-added products, an established presence in key consumption markets, financial stability, and a dedicated workforce.
Heritage Foods has built an integrated distribution network includes its own stores, such as 237+ Happiness Points, 850+ Parlours, and over 2,30,000 Trade Outlets across 12 states in India. The company is well-established in both modern trade and e-commerce retail. With a fleet of over 2,100 vehicles and a network of more than 6,900 distributors, Heritage Foods ensures timely delivery to consumers. The Company’s milk procurement process is supported by a tech-integrated network with over 10,000 Village-Level Milk Procurement centers in nine states.
Innovation is a key focus area for the HFL and the company continuously introduces new products. Its wide product portfolio and strong brand recall help it to maintain growth momentum in a competitive industry. The company aims to increase its revenue from value-added products by about 3% annually. It is also expanding footprint in value-added dairy products like cheese, yogurt, and buttermilk, where margins are superior. HFL targets to grow its revenue from value-added products to around 45% in the next three years. The Company also launched a new product line called ‘Truly Good,’ featuring pure ghee laddus, expanding its range in the dairy and food segments. Additionally, the company is involved in the cattle feed business through its subsidiary, Heritage Nutrivet Limited (HNL).
Recently, HFL entered new markets in West Bengal, Bihar, and Jharkhand, recognizing the East as a growing dairy market. The company is launching long-shelf-life milk and various beverages, including milkshakes, lassi, flavored milk, cold coffee, along with ghee and laddus.
Regarding the potential launch of fresh milk in Bengal, the company has indicated that this will likely be part of the second phase of its operations. Fresh milk requires significant capital investment, so the company is currently focused on generating demand and building brand momentum. Once a sufficient consumer base is established, the company plans to invest in integrating raw milk procurement.
Heritage Foods has partnered with SIG for aseptic carton packs, installing a SIG Xslim, 12 Aseptic filling machines at its manufacturing unit in Medchal−Malkajgiri district of Telangana. The state-of-the-art facilities can fill 12,000 SIG XSlimBloc carton packs per hour and supports nine different volume sizes, allowing HFL to meet diverse consumer needs and target various price points.
As the India’s second largest dairy companies, HFL is committed to delivering high-quality and sustainable dairy products, ensuring nutrition for all. The company is well-positioned for growth, supported by its capacities and strategies for increasing milk procurement volumes, enhancing the share of value-added products and growing its footprint in both existing and new markets. The Company management’s commitment to innovation and sustainability might help it to build strong competencies in product introduction, distribution and balance sheet strength. These strengths position Heritage Foods well for continued growth and success in the highly competitive dairy industry.
Financials
HFL reported strong growth in Q1 FY25, mainly due to an increased contribution from value-added products. The company registered nearly a 12% increase in revenue to Rs 1,033 crore compared to the same period in the previous financial year. During this period, net profit surged by 250% to Rs 58 crore, up from Rs 17 crore. Operating income rose by 41.5% QoQ and increased by 201% YoY. For the trailing twelve months (TTM) period, the company reported revenue of Rs 3,903 crore and a net profit of Rs 148 crore. With an equity capital base of Rs 46 crore, TTM EPS stood at Rs 16.
Outlook
The Indian dairy industry includes traditional items like raw milk, curd, and ghee, as well as value-added products such as cheese, yogurt, and flavored milk, etc. The outlook for the organized dairy industry is believed to be promising due to factors like increasing urbanization, rising income levels, and greater health consciousness. The industry’s growth is gaining momentum as it witnesses a gradual shift from the unorganized sector to the organized sector, as in the organized dairy companies, there is improved quality control, branding, and distribution systems, which helps to build consumer trust and expand market reach. New-gen customers are more and more preferred for branded products because which are seen to be more trustworthy due to better quality and hygiene. We believe HFL is one of the major beneficiaries of this changing customer trend.
HFL is increasingly focusing on value-added products like flavored milk, probiotic drinks, and fortified dairy items. These products offer higher margins and cater to the evolving preferences of health-conscious consumers, driving growth for the company going forward. In addition to this, the company is expanding its footprint into northern states, which also provides a promising outlook for the company.
Risks
Dairy companies are vulnerable to fluctuations in milk prices, which are influenced by factors like seasonal variations in milk production, feed costs, and government policies. Price instability can impact profitability and make long-term planning difficult for Dairy companies. The Indian dairy market is highly competitive and fragmented, with numerous small-scale and regional as well as hyperlocal players. This fragmentation makes it challenging for companies to achieve economies of scale and forced to maintain competitive pricing. HFL also faces geographic concentration risk, as 75% of its revenue coming from just four states, despite having a presence in a dozen states.
Sector: Dairy products
Market Price: Rs. 555.00 as on today
FV: Rs 5/-
Stock Name: Heritage Foods Ltd
BSE Code: 519552, NSE Code: HERITGFOOD
Market Cap.: ₹5100 Crore
Book Value: Rs. 86.8
Segment: Dairy products
Incorporation: 1992
Headquarters: Hyderabad
