Heritage Foods Q1 FY27 Earnings Call — Analysis (NSE: HERITGFOOD)
Heritage Foods posts record quarterly revenue of ₹1,338 Cr driven by 40% VAP surge, but margin pressure from elevated milk costs persists; PAT at ₹15 Cr.
The take
Q1FY27 Consolidated Revenue ₹1,338 Cr ( +18% YoY ) . New guidance — consolidated revenue growth 16-17% . New story: VAP-driven premiumisation and mix shift .
Results
Q1FY27 consolidated revenue ₹1,338 Cr (+18% YoY); EBITDA ₹62 Cr (4.6% margin); PAT ₹15 Cr (1.9% margin); VAP revenue ₹564 Cr (+40% YoY) reaching record 44% share.
Financial highlights
| Metric | Value | Change | Basis |
|---|---|---|---|
| Consolidated Revenue | ₹1,338 Cr | +18% | yoy · Q1FY27 |
| EBITDA | ₹62 Cr | point_in_time · Q1FY27 · margin 4.6% | |
| EBITDA Margin | 4.6% | point_in_time · Q1FY27 | |
| PAT | ₹15 Cr | point_in_time · Q1FY27 · margin 1.9% | |
| VAP Revenue | ₹564 Cr | +40% | yoy · Q1FY27 |
| VAP Revenue Share | 44% | +8pp | yoy · Q1FY27 · from 36% in Q1FY26 |
| Milk Procurement Volume | 18.10 lakh litres/day | +2% | yoy · Q1FY27 |
| Milk Procurement Price | ₹46.61/litre | +7% | yoy · Q1FY27 |
| Average Milk Sale Price | ₹58.68/litre | +4% | yoy · Q1FY27 |
| Ice Cream Revenue | ₹55 Cr+ | +65% | yoy · Q1FY27 |
Guidance
Management targets VAP contribution of ~50% by FY30 (from ~39% in FY26), with VAP revenue growth sustained at ~25% and long-term overall revenue growth in the mid-to-high teens.
What management committed to
- Overall revenue growth target: mid-to-high teens (~16-17% YoY) over the long term. — 16-17%, long term
- VAP revenue growth target: ~25% YoY on a sustained basis. — ~25%, long term (sustained)
- Milk volume growth target: 7-8% YoY over the long term. — 7-8%, long term
- VAP contribution to revenue to reach ~50% by FY30 (from ~39% in FY26). — ~50%, FY30
- FY27 capex planned at ~₹250 Cr. — ₹250 Cr, FY27
- Heritage intends to add ~5,000 farmers in Q2FY27. — 5,000 farmers, Q2FY27
Key themes
VAP-led premiumisation amid raw milk cost headwinds
How the narrative shifted
- VAP-driven premiumisation and mix shift: Management positions value-added products as the primary growth engine, on track to become 50% of revenue by FY30, driving premiumisation and margin improvement.
- Elevated raw milk costs and weather uncertainty: Raw milk procurement prices remain elevated due to supply tightness and adverse weather, compressing margins; price hikes are being passed on but with a lag, and the outlook remains unpredictable.
- Distribution expansion driving volume growth: Volume growth primarily from deeper distribution within existing geographies, not new regions; 80% of VAP growth attributed to increased availability through new distribution points.
- Market share gains in organized dairy: Heritage gaining market share across curd, paneer, buttermilk from other branded players, reflecting strengthening brand and consumer traction.
- Margin recovery narrative through operating leverage: Management highlights operating leverage from rising VAP mix, with employee and other expenses as % of revenue declining, and expects margin expansion when raw milk prices moderate.
- Ice cream and adjacent nutrition platforms scaling: Ice cream (Alpenvie, Get-A-Way), Nutrivet animal nutrition, high-protein yogurt (Livo) and peanut butter are building new growth avenues and reducing dependence on liquid milk.
Operational commentary
- VAP volume growth broad-based: paneer +33%, curd +26%, ice cream +25%, buttermilk +60%, lassi +98% YoY; VAP revenue growth 35% volume-driven, 5% price-driven.
- Ice cream business crossed ₹55 Cr (+65% YoY); Alpenvie +44%, Get-A-Way +196% and near breakeven; new ice cream facility ramped to ~40% utilization, providing headroom.
- Distribution expansion in existing geographies drove ~80% of VAP growth; gained market share in curd, paneer, buttermilk within organized channel.
- Milk procurement network deepened: added ~5,000 farmers in Q1, aiming for another ~5,000 in Q2; procurement volumes up 2% YoY despite industry supply tightness.
- Heritage Novandie became wholly-owned subsidiary (Livo high-protein yogurt brand); stake in Peanut butter and Jelly Ltd increased to 71% expanding 'better-for-you' nutrition portfolio.
- Alpenvie undergoing comprehensive brand refresh; Nourish+ high-protein paneer gaining traction; new SKUs launched across premium dairy/nutrition categories.
- Loss-making regions (Mumbai, North) and ghee business showed reduced losses; ghee EBITDA loss narrowed to -8.5% from -12% YoY.
- Operating leverage evident: other expenses lowered to 9.01% of revenue (vs 9.64% Q1FY26) and employee costs to 6.74% (vs 7.21%).
Analyst Q&A
Q. What is the best-case and worst-case milk procurement price scenario after the October flush?
We'll wait and explain after it happens. It's a cyclical business – best case buffalo flush is good and prices come down, worst case it doesn't happen and prices continue to increase.
Q. How did the gross margin decline despite a stable weighted-average procurement price?
The mix shifted from buffalo to higher-cost cow milk; cow milk rose ~₹1/litre to ₹43.2, buffalo rose to ₹65.99 but volume dropped >20%. Also SMP and packing material impacted ~80bps.
Q. When can we expect EBITDA margins to return to 6-7%?
We aim for high single-digit EBITDA but haven't set a timeline; still three-fourths of revenue is raw material-dependent; VAP salience and operating leverage will help, but raw milk pricing remains key.
Q. What is driving the 35% VAP volume growth?
80% from distribution expansion within existing geographies, 20% from consumer traction and market share gains vs. other branded players; also cycling a low base of last year's adverse weather.
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