ICICI Securities Initiates Coverage on Heritage Foods with a Buy Recommendation, Targeting Rs 385

Heritage Foods Reports Resilient Q4FY26 Revenue Growth Amidst Challenging Industry Conditions

The dairy industry continued to face severe milk shortages and a weak flush season during the fiscal year 2026, leading to sharp inflation in procurement prices. Despite these challenges, Heritage Foods (Heritage) demonstrated resilient revenue growth in the fourth quarter of fiscal year 2026, with a 10.4% year-over-year (YoY) increase.

Heritage's revenue growth was largely driven by the growth of branded value-added products (VAP), which recorded a ~18% YoY increase in the fourth quarter. This growth in VAP revenue contributed significantly to the company's overall revenue, with VAP accounting for 35.5% of total revenue in the quarter, a 300 basis point (bps) improvement from the previous year. The company's margins, however, were impacted by the sharp increase in milk procurement prices, which grew by 8.8% YoY, outpacing revenue realization by 4% YoY.

The company's expansion into new markets and product lines also contributed to its revenue growth. Heritage's new ice cream plant in Hyderabad, which has an annual capacity of 24 million liters, has commenced commercial production and is expected to meaningfully scale revenue to INR 5,000 million by fiscal year 2030.

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Heritage's subsidiary, Heritage Nutrivet, delivered a strong performance in fiscal year 2026, with revenue growth of ~32% YoY. This performance reinforces the company's animal nutrition opportunity and highlights its potential for growth.

Outlook and Recommendation

While the near-term margin environment may remain under pressure due to elevated milk costs, the company's strong VAP growth, ice cream scale-up, and improving mix are expected to support earnings recovery over the medium term. Based on this analysis, we maintain a HOLD rating for Heritage Foods with a DCF-based revised target price of INR 385 (earlier: INR 415) and an implied target price-to-earnings ratio of 15x for fiscal year 2028 earnings per share.

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Note: The table presents a comparison of Heritage Foods' revenue growth with that of its subsidiary, Heritage Nutrivet, for fiscal year 2026.