Heritage Foods Q1 FY27 Results (NSE: HERITGFOOD)
Signal: Margin pressure
The read
Q1FY27 showed strong revenue momentum (+17.7% YoY) but a steep gross margin compression of 510bps YoY due to milk procurement inflation, eroding profitability. PAT fell ~38% YoY. This marks a 5th consecutive quarter of YoY margin contraction (from Q3FY26 onwards per PRIOR RESULTS SERIES), suggesting a structural input-cost headwind that pricing has not fully offset.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹1,338.09 Cr | 17.7% | 15.6% |
| EBIT | ₹40.49 Cr | -25.4% | |
| Net profit | ₹24.97 Cr | -38.4% | |
| EPS | ₹2.72 | -37.8% | |
| EBIT margin | 5.3% |
P&L walk
Revenue growth of 17.7% YoY was strong, driven by a 17.2% jump in the core dairy segment, but gross margin collapsed 510bps YoY to 25.6% as raw material cost as % of revenue surged by 740bps. The dairy segment's PBIT was down 25.7% YoY, and the feed segment's PBIT fell 74.6% YoY. Employee expenses grew moderately at 9.1% YoY (vs revenue +17.7%), implying modest positive operating leverage on that line, but depreciation (+41.7% YoY) and finance costs (+95.9% YoY) grew far faster, wiping it out. As a result, consolidated EBITDA margin compressed ~100bps YoY to 5.3%, and PAT before minority fell 38.4% YoY to ₹249.71 mn. No exceptional items this quarter vs. a small one last year. EPS of ₹2.72 tracked PAT decline.
Segments
The dairy segment, contributing 98.1% of revenue, saw its PBIT fall 25.7% YoY to ₹375.76 mn, despite 17.2% revenue growth, due to raw material cost inflation. The feed segment's PBIT plunged 74.6% YoY to ₹16.68 mn, a notable drag. Renewable energy segment was modest (PBIT ₹12.43 mn, +21.7% YoY) but too small to move the group result.
Key positives
- Revenue growth accelerated to +17.7% YoY, the highest in the last five quarters, driven by dairy segment volume/mix improvements.
- Employee expenses grew at only 9.1% YoY, below revenue growth, indicating some operating cost control.
Key concerns
- Consolidated gross margin contracted materially by 510bps YoY to 25.6%, as raw material costs soared to 76.4% of revenue from 69.0% in Q1FY26, pointing to severe milk procurement inflation.
- PAT fell 38.4% YoY, marking the 5th consecutive quarter of YoY profit decline, as input cost pressures have not been fully passed through to consumers.
- Feed segment PBIT crashed 74.6% YoY to ₹16.68 mn, indicating severe margin compression in that business line.
- Finance costs nearly doubled (+95.9% YoY) to ₹82.34 mn, reflecting higher debt to fund capex and working capital, compressing net margins further.
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