Hindustan Foods Limited (HFL) recently announced its financial results for the quarter and half-year ending in September 2023. Here are the key points:
Financial Highlights for H1FY24 (First Half of the Fiscal Year 2023-24):
Revenues remained steady at Rs 1,297.1 Crores in H1FY24, compared to Rs 1,262.3 Crores in H1FY23.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased by 29% to Rs 106.9 Crores in H1FY24, up from Rs 82.7 Crores in H1FY23.
Profit After Tax (PAT) increased significantly by 42% to Rs 48.0 Crores in H1FY24, up from Rs 33.8 Crores in H1FY23.
Financial Highlights for Q2FY24 (Second Quarter of the Fiscal Year 2023-24):
Revenues remained stable at Rs 677.0 Crores in Q2FY24, compared to Rs 663.7 Crores in Q2FY23.
EBITDA increased by 26% to Rs 55.6 Crores in Q2FY24, up from Rs 44.0 Crores in Q2FY23.
PAT increased by 31% to Rs 24.7 Crores in Q2FY24, up from Rs 18.9 Crores in Q2FY23.
Operational Updates:
A new factory in Guwahati, Assam, dedicated to juice production, is progressing well and is expected to begin commercial production in the fourth quarter of FY24.
The companyâs plans for the Soap & Bars project have been commercialized since the first quarter of FY24 and are ramping up successfully.
An upgrade of the beverage facility in Mysuru for a new MNC customer has been completed, and commercial production began in October.
Other Updates:
The company is raising Rs. 400 Crores through preferential warrants for future growth.
HFL plans to invest up to Rs. 100 Crores in the sports shoe manufacturing sector and has executed a share purchase agreement to acquire 100% share capital of KNS Shoetech Pvt. Ltd.
The Board has approved an investment of Rs. 75 Crores to set up a new Greenfield Ice Cream facility.
The acquisition of the Baddi factory has been delayed due to regulatory approvals, and the management now expects to complete the transaction by the end of Q3FY24.
PE funds have a shelf life. So they did sell from one of their older fund. However, in recent capital infusion announcement, it will be participating through its new fund. Hope its clear.
Update on Business Transfer Agreement (âBTAâ) with Reckitt Benckiser Healthcare India Private Limited (âReckittâ) for acquisition of manufacturing facility of Reckitt.
Point A )KNS Shoetech Private Limited Wholly owned subsidiary (w. e. f October 01, 2023):
Has entered into a Business Transfer Agreement (BTA) with SSIPL Retail Limited (âSSIPLâ). This agreement entails the acquisition of manufacturing undertakings previously owned by SSIPL, located at Bangran and Bhagani in Himachal Pradesh as well as Kundli in Haryana. The total outlay for the transaction was more than Rs. 100 crores with the BTA amount of nearly Rs 77 crores. The facilities are catering to key customers like Puma, Reebok, Asics, Sketchers, etc. This acquisition marks a noteworthy expansion for KNS Shoetech Private Limited and Hindustan Foods Limited within the sports shoe manufacturing domain. This strategic move underscores the companyâs commitment to enhancing their manufacturing capabilities and strengthening their presence in this sector.
Point B): The company will set the goal of Revenue of Rs 4000 Cr in FY26, the estimated revenue of FY 24 ~ 2600 Cr± with PAT margin ~2.70%. The important part of the lastâs commentary, they have an ambitious target of the PAT margin ~ 3.5%. So interestingly to watch two events revenue and margin improvement on quarter on quarter. The company has a good liquidity position on cash.
So wait and watch the Q4 numbers and management commentary on business.
Why Gross Block is one of key parameter of FMCG company?
Some key aspects on gross block of commentary:
I would like to highlight that in the last 5 years, our gross block has grown fivefold to more than INR1,000 crores. This has been done on the back of both greenfield expansion as well as M&A. This strong foundation is now enabling us to plan for new investments that will set tone for the future growth over the next few years!!!
We will invest around INR800 crores, INR900 crores in gross block in next 2 years. Some of it already been in public domain, the ice cream factory or the shoe business or Baddi and all those things. And the fundraise, which we have done, coupled with the debt which we take and also the internal accruals will fund this growth for next 2 years.
Assume at the end of the FY26, Gross block will be 1800-1900 Cr and 4X assets turnover means ~ 3600 -3800 Crores turnover in future. (The company target of 4000 Cr, which one match on this concept)
In addition to the continued investment in the FMCG business, like our new ice cream plant in Haryana, the new beverage plant in Assam and a few others that we are working on, weâve also been working on opening up adjacent sectors where we think we can grow. One of these sectors is OTC pharma and health care products in which the company has identified certain M&A opportunities. : This one apart from existing unit at Baddi.
The other sector that weâve been bullish about has been the sports shoe category, where we are seeing some tailwinds due to the government policies and global trade movements. To leverage this, we again have decided to go the route of inorganic growth and have identified some M&A opportunities, which should help us scale this business sooner. They have already announced on 01.04.2024.( perfectly tick)
Now after the shoe acquisition, and Iâm talking about maybe a quarter from now, we will have a slightly larger take in terms the gross margins for a couple of reasons. One, that there is a lot of shared manufacturing as far as the shoe business is concerned. And the shoe business functions in a completely different way. The shoe business will become sizable in the next, letâs say, 6 months. And post that, I will come back to you with some kind of definite guidance in terms of
gross margins. (Improvement in Gross margin means bottom-line to some extent will be improved)
Assume at the end of the FY26, Gross block will be 1800-1900 Cr and 4X assets turnover means ~ 3600 -3800 Crores turnover in future. 4x asset turn on 1800 means Rs7200cr and not 3600cr. need to rectify.
I have noticed from the screener that the JFM and AMJ quarters for this company shows less sales than the JAS and OND quarters. Can any expert confirm if this analysis is correct. Also, where can I grab the Order book of this company?
Hi Vineet! nice presentation with future projections. I would like to know what if HFL comes with their own brands resulting in increase in margins. I have read they have commenced with HFL Healthcare & Wellness Pvt Ltd. Welcome to HFL Healthcare and Wellness Pvt Ltd where focus is on their own branded healthcare products like Vitamins, Minerals & Nutraceuticals.
Please enlighten on this !
Thanks
Following is the phrase taken from the website that you have attached in your post. They starting their own brand is something that I am unaware about. As far as I know, they started a facility in health care segment. Please go through that phrase below:
"HFL Healthcare and Wellness Pvt.Ltd. is a 100% subsidiary of Hindustan Foods Ltd (HFL), which is listed on both BSE & NSE. HFL is part of the Vanity Case Group Of Companies that operates 34 plants across 16 different locations in India, manufacturing multiple categories of products for the FMCG, Healthcare & Wellness sectors.
The mission of HFL Healthcare and Wellness Pvt.Ltd. is to become a leader in the contract manufacturing space and a preferred business partner for Medicated/Non-Medicated Foot Care, OTC and Personal Care products."
You will see that it is clearly written what their goal is. Please share the source where you read about they starting their own brands.
Company does not sell its own brands nor does it intend to launch its own brands mainly for two reasons - 1. brand building is not the core strength of the co 2. it will be in direct conflict of interest with its clients.
It had tried its hand in own brands 5-6 years back to quickly realize their mistake and they shut it off.
If we look at its historical chart, Hindustan Foods mimics itself and is all set to break out from the current levels and cross its ATH soon. The strongest reason being that it has consolidated and provided us with only 56% returns over the last 3 years despite showing decent results. Current PE stands at 73 and it can very well cross 100 in the near future.
It closed over 620 today which is a good sign and if the market doesnât behave adversely, we may be able to see the share price crossing 700 this week itself.
All those who held on to it with patience shall be rewarded handsomely.
History is repeating itself if you look at the chart:
It consolidated throughout in 2021 and then started moving up around the later half of 2022.
The same happened in 2023 where it consolidated and now in the later half of 2024, itâs moving up and all set to give a breakout.
Another reason is the current PE. It used to trade above 100 before 2021 but came down below 60 when the price went below 500 and the profits kept increasing.
Now that company has done so much capex and has promised to double the revenue every three years, the PE will shot up again above 100.
But, this is all my understanding and I am not influencing anyone to make any decision.
perfectly tick)
