Heritage Foods share crashes 10% after reporting massive decline in net profits in Q3

Synopsis: Heritage Foods shares fell over 10% after Q3 FY26 results showed modest revenue growth but sharp margin pressure. Rising milk procurement costs, declining profitability, and weak PAT performance outweighed steady value-added product growth, leading to negative market reaction.

The shares of this company, which is one of India’s leading dairy companies with a vision to provide high-quality, nutritious milk and dairy products to families across the nation, had its shares crash after the company reported a disappointing result with flat to declining performance in its financials.

With the market cap of Rs 3,361 crore, the shares of Heritage Foods Ltd have crashed more than 10% and reached a low at Rs 355.85, compared to their previous day’s closing price of Rs 397. The shares are trading at a PE of 20.6, whereas its industry PE is at 25.2.

About the Q3 Result highlights

The revenue from operations for the company stood at Rs 1,119 crore when compared to Rs 1,034 crore in Q3 FY25, growing by about 8 per cent on a YoY basis and on a QoQ basis increasing by 0.5 per cent from Rs 1,113 crore in Q2 FY26.

The PAT fell by about 19 per cent on a YoY basis when you compare the Q3 FY26 profit at Rs 35 crore to Rs 43 crore in Q3 FY25 and on a QoQ basis has fallen 31 per cent from Rs 51 crore in Q2 FY26. 

Business highlights 

Heritage Foods registered 8% YoY revenue growth to Rs 1,119 crore in Q3 FY26, despite the company facing a difficult environment with milk shortages, weather-related issues, and increased procurement prices. Consumer dairy (excluding bulk fats) registered 13% YoY growth, while the bulk fats business dropped significantly in the quarter, thereby affecting the revenue base.

Value-added products (VAP) continued to be an important driver, with VAP revenues growing 13.8% YoY to Rs 327 crore, and consumer fats like ghee and butter registering 22.6% YoY growth, thereby increasing their share to 38.4% of the total revenue from 33.5% in the previous year. 

On a category basis, curd sales increased 6%, paneer sales increased 25%, ice creams sold 18% higher, and drinkables registered robust growth with 29% growth in lassi sales and 36% growth in milkshake sales. The company registered a 4.9% price increase, thereby increasing net milk realisation to Rs 57.31 per litre, an increase of Rs 2.67 per litre YoY.

On the expense side, the average procurement price of raw milk has risen by 9% YoY to Rs 45.55 per litre. The gross margin has contracted to 23%, EBITDA has decreased by 15% YoY to Rs 63 crore, the EBITDA margin has reduced to 5.6%, and PAT is down 20% YoY to Rs 35 crore. 

Milk procurement volumes have decreased by 9% YoY to 16.73 LLPD but have improved by 4% QoQ. The company is set to start new ice cream and flavoured milk production lines in Q4 FY26.

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