ADF Foods Share Price Surges 11 Per Cent Intraday

ADF Foods share price surged 11 per cent intraday on the

National Stock Exchange (NSE) after that the companys
management stated that it was expecting profitability in
American operations in the coming quarters. The promoters are
keen to increase stake from current 53 per cent to 60 per cent.
In the last 6 months, ADF Foods share price has shown an
increase of 120 per cent. On 27th April the stock stood at Rs.81
and today it is reading at Rs.180. Also, the previous high of the
scrip stood at Rs.190.

Heritage Foods stock may get re-rated:

Chandrababu Naidu's Heritage Foods is planning to sell its retail business to Kishore Biyani's
Future Retail for about Rs.275 cr apart from a variable payout. The deal, which shall be
funded by issuing shares of Future Retail to Heritage Foods shareholders, shall be a big
positive for the latter's shareholders. Heritage Foods shall benefit as its financials, excluding
the loss making retail, shall appear completely different.
However, for Future Retail, the gain shall be restricted to the firm getting stronger foothold in
the Hyderabad, Chennai and Bengaluru market via Heritage Foods' close to 120 retail outlets,
presently loss making. However, the valuation at which Future Retail is acquiring
Heritage is reasonable at half of one-time sales. Retail business has been a drag on Heritage
for the last several years, depressing the firm's financials net profit, profit margins and
ROCE - return on capital employed.
For example, ex-retail, Heritage's EBIT or earnings before interest and tax for FY16 was
higher by 15 per cent, ROCE of over 50 per cent against 30 per cent with retail. However

now, with the cash-guzzling retail business out of the way, the management shall be able to
concentrate on its core dairy business and have higher cash-in-hand to expand and grow at 15
per cent-20 per cent for the next 5 years.
The deal with Future Retail could re-rate the Heritage Foods' stock. On the basis of
Heritages estimated FY17 dairy business earnings alone, the stock trades at 22 times its
earnings as compared to 35-80 times in case of its peers Parag Milk Foods, Hatsun Agro
Products and Prabhat Dairy.
At 13:38 pm, ADF Foods share price was trading 6.01 per cent at Rs.171 on the NSE today.
The stock opened at Rs.162.90 from a previous closing of Rs.161.30. Dynamic Levels
Researchers have identified ADF Foods share as a multibagger stock and recomended
investment in it.

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Article Written by
Salman Hashmi