Vijay Kedia Dumps Heritage Foods in Q1. Here's Why

In the coming weeks, our team will publish series of articles on stocks which have seen interest from the ace investors in the second quarter of financial year 2023-24.

Over the weekend, we wrote why Mohnish Pabrai sold stake in Rain Industries and why Mukul Agarwal reduced exposure in Surya Roshni.

Today, we explained why Dolly Khanna added a multibagger steel stock to her portfolio and why Radhakishan Damani sold Andhra Paper.

Adding to the list, we have Vijay Kedia who sold his holding in smallcap dairy products company - Heritage Foods.

Who is Vijay Kedia?

Vijay Kedia is an Indian investor and trader based out of Mumbai. His company - Kedia Securities - is the largest shareholder (after the promoter) in several listed companies.

Kedia has been involved in the Indian stock market since the age of 19. He has been described by many as a 'market master'.

To point out a few of his investments, he bought ACC at Rs 300 in 1992-93 and sold the stock around Rs 3,000 within a year and a half.

During the years 2004 and 2005, he picked several multibagger stocks, which gave returns of over 1,000% in the next 10-12 years. A few of these stocks were Atul Auto, Aegis Logistics, and Cera Sanitary.

Which Stock did Vijay Kedia Sell and Why?

The stock in question is Heritage Foods.

The smallcap company is engaged in the business of procurement and processing of milk & milk products. It's also involved in generation of power through solar & wind for the captive consumption of its dairy plants.

According to the data available on the exchanges, Vijay Kedia's stake in the company dropped below 1% recently.

In the June 2023 quarter, the investor held 1.20% stake in Heritage Foods with 1,113,433 shares. The investment was made via one of his firms Kedia Securities.

But when the company filed its latest September end shareholding, Kedia's name is missing from the list.

Companies have to report details of shareholders who own more than 1% stake in a company.

Kedia Securities owned 525,000 equity shares, or 1.13% stake in the company as of December 2022. His holding was adjusted accordingly after the rights issue was completed in January 2023.

It is difficult to ascertain whether Kedia has completely exited the company or whether he sold some of the shares.

While we don't know the exact reasons why Kedia offloaded Heritage Foods, there are some reasons we can guess...

After underperforming for the past two years, shares of Heritage Foods have found momentum in this current bull run.

This could be attributed to the performance it has put up in the past few quarters. Heritage Foods recently posted its June 2023 quarterly earnings where profits more than doubled to Rs 167.3 million (m) while revenues shot up by 12% to Rs 9.2 bn.

Amid input price corrections and price hikes taken by the company, margins improved in the quarter under review.

Meanwhile, new product launches definitely helped. Heritage Foods launched nearly ten new products in the first quarter.

Following good earnings, shares of the company saw a sharp run-up. So one reason behind Kedia's selling could be profit booking.

When it comes to investing, top investors know that rebalancing is the name of the game. You need to take money out of an outperforming stock at regular intervals and put it into another underperforming one.

The other reason why Kedia pared his stake/sold Heritage Foods could be because the company was in the news recently for some alarming concerns.

Heritage Foods is led by TDP chief Nara Chandrababu Naidu's daughter-in-law Brahmani Nara.

The former Chief Minister and President of Telugu Desam Party (TDP) was arrested in the skill development scam. Once this news was out, shares of the company crashed over 7%.

No one really knows what could happen if the situation deteriorates.

But Kedia seems to have played the right move by paring his holding as the stock has already run up in recent months.

What Next?

The recent performance put up by the company is no doubt noteworthy. Heritage Foods achieved its highest-ever quarterly revenue in Q1.

Apart from adding new value-add products, it also focused on enhancing reach and added new outlets.

The company is actively focusing on expanding its distribution and increasing the number of milk analysers in collection centres.

The management have also highlighted that milk procurement prices have started to come down, while production has also improved across all regions.

Going forward, the company is expecting double digit volume growth, which could directly improve margins.

For few weeks in Q1, the company also saw demand affected due to unseasonal rains. For this challenge, it is working on new strategies to weatherproof the business.

How Heritage Foods Share Price has Performed Recently

In 2023 so far, Heritage Foods share price is up 26%.

Today, the stock opened 3% lower at Rs 224 compared to its previous close of Rs 231. It ended the day at Rs 228, down 1.2%.

Heritage Foods has a 52-week high of Rs 287 touched on 24 July 2023 and a 52-week low of Rs 136 touched on 17 March 2023.

At the current price, Heritage Foods trades at a PE multiple of 27x compared to its five-year average PE multiple of 24.9x.

On the price to book value front, Heritage Foods trades at a P/BV multiple of 2.9x compared to its long-term average of 2.5x.

About Heritage Foods

Heritage Foods has a strong market presence across 11 states in India.

It is one of the largest private dairies in South India and has a significant market share in Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu.

To know more about the company, check out Heritage Foods financial factsheet and its latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...