In an earlier piece, I have talked extensively about how Dolly Khanna, Vijay Kedia and Kamal Kabra are collectively bullish about Heritage Foods and have invested large sums of their capital into the small-cap company.
I drew particular attention to the meticulous analysis conducted by Vijay Kedia personally on why the stock has a chance of being a 6-bagger in the next few years if everything goes as per plan.
I also drew attention to the technical analysis conducted by Himanshu Gupta, an expert, on why Heritage Foods is in a “blowout phase” and offers the potential for humongous gains to investors.
Now it is my bounden duty to draw attention to the latest research report by Religare recommending a buy of Heritage Foods.
The essence of Religare’s report is as follows:
“Net sales and PAT surged at CAGR of 18.1% and 38.9% respectively in last 5 years. Management aims to achieve sales of Rs. 6,000 crores by 2020 from Rs. 2,072 crores in FY15. We expect Heritage Foods to grow around 15-20% in next 3-4 years with enormous scope for dairy industry due to rising income level and population, health awareness, better quality of animal food leading to higher productivity, etc. The company has strong presence in Southern states and has also entered Delhi and Maharashtra to cater to these growing markets. Retail division will benefit from higher disposable income, economic growth and availability of many products under one roof. Bakery, Agri and Energy divisions contribute to less than 4% of the total revenue but are expected to grow at over 20-25% due to low base effect and thus will benefit the topline.
….
Recent investments and acquisitions in dairy industry have been done on rich valuations. Heritage is trading relatively cheap compared to its peer and thus we advise to buy the stock at CMP of Rs. 525 with a target price of Rs. 640 for long term horizon. At CMP of Rs. 525 the stock is trading at FY16 E P/E of 20.7 and FY17 E P/E of 16.3 times.”
The Company is owned by the family of N. Chandrababu Naidu, the leader of the Telegu Desam Party and the Chief Minister of Andhra Pradesh. This can be a boon or a bane depending on how you look at it.
Now, the onus is on each one of us to take an appropriate and informed decision in the matter.
Heritage foods has potential. offcourse the crony capitalism will help if not the actual business.
StockAxis recommended it almost an year ago.
Dolly Khanna is generally associated with reasonably OK compnies, but she always get first movers advantage in terms of bargain lower prices and we will only know when it has already run up a lot and has become over priced and near to her Exit Time .