While, it was a Terrible Tuesday on June 4 after Lok Sabha elections result 2024 for a. Indices – Sensex falling by 4,207 points, NIFTY down by 1295 points, b. Maharatna(s), Navratna(s) – ONGC fell from 285 to 242.80 in between June 3 and June 4, c. Biggest Company by Market Cap – Reliance falling from 2993 to 2835.55, somewhere a tiny stock with a market cap of less than 4,000 crore started booming – Heritage Foods stocks.
Let’s check all about this company that is making quite some noise post the Lok Sabha election results
Heritage Foods Stocks and Story before and after June 4: From 441 to 727.35
On 4th of June, Heritage Foods shares instead of falling like others, picked up from 441 to 455.45 and made a high of Rs 479.80.
The next day, it surprised even more. On June 5, the company stock opened at 476.10, closed at Rs. 546.50 and then on June 6, the stock opened at Rs 590 and closed at 601.15. Then on June 7 it reached at 661.25 and was up exactly 10%
And today on June 10th, it is already closed at 727.35 at around 9.15am hitting upper circuit of 10%. Hitting RSI of 95.503
Considering the above, surprisingly in 5 Days, the stock is up by 68% and in 1 month 110.22%.
On 28th May, the stock was Rs. 366 only and on 30th May, the stock opened at Rs 388.10. So, technically in just 10 days, the stock almost doubled.
Also Read: 11 Top Dividend Stocks Whose Dividend Yield Is More than FD Interest Rates
How and Why did Heritage Foods Stocks Rise So Much?
Heritage Foods isn’t some large cap or a big company with great fundamentals. The company is a small cap company and now at its peak stands as a Rs 6136 crore company. So, a month ago it was nearly half of what it is today. Besides, when it comes to financial growth the company is lagging behind the market.
Now the question is, how and why did Heritage foods stocks rise so much?
Well, to start with the company is owned by the Naidu family. The company was founded in 1992 by TDP Chief’s wife Nara Chandrababu Naidu. So, following the news of its founder, N. Chandrababu Naidu, making a significant political impact in the 2024 general elections, the prices started soaring.
He is set to become the Chief Minister of Andhra Pradesh for the fourth time on June 9, 2024, as his party, the Telugu Desam Party (TDP), achieved a decisive victory in the assembly elections. The surge in Heritage Foods’ stock is widely attributed to this news.
Or is it something else?
Interestingly, Rahul Gandhi has alleged that the BJP leadership was aware of the Intelligence Bureau’s estimate that their party would secure 220 seats, yet they still claimed that the market was set to “boom.” (Source). Now if this is for real, it was apparent that they also knew about TDP’s role post June 4 results. So, did all this pump Heritage Foods stocks up? The question remains!
Besides, the stock continues to rise despite crossing the RSI of 90. While, it had the RSI of 94 on June 7, it did open in upper circuit,
How does Heritage Foods Stock Benefits the Naidu Family?
Heritage Foods’ market capitalization surged by over Rs 2,400 crore this week. The company’s market cap rose to Rs 6,136 crore on June 7, up from Rs 3,700 crore a week ago.
Exchange data shows that Naidu’s family owns a 35.7 percent stake in the company. His wife, Bhuvaneswari, holds a 24.37 percent stake, while his son, Lokesh, and daughter-in-law, Brahmani, own 10.82 percent and 0.46 percent, respectively. Naidu’s grandson, Devansh, holds a 0.06 percent stake in the dairy company.
Collectively, their net worth increased by Rs 870 crore, rising to Rs 2,190 crore from Rs 1,319 crore a week ago.
Also Read: Nvidia Becomes World’s Second Largest Company – How Did Nvidia Do It?
Can Heritage Foods Shares Benefit Retail Investors? Is This the Right Time of Buy Heritage Foods Stocks?
Well, technically, the RSI and MFI are hovering above 94. So, it’s in the overbought zone. And so going by the rule of the book, not a time to enter at all.
Talking about Financials and Income statement – The company doesn’t look as promising as it should look –
Revenue Growth: Over the past 5 years, the company’s revenue has grown at an annual rate of 3.22%, compared to the industry average of 11.83%.
Market Share: Over the past 5 years, the company’s market share has decreased from 3.46% to 2.52%.
Net Income: Over the past 5 years, the company’s net income has grown at an annual rate of -1.58%, compared to the industry average of 13.47%.
Valuation: The stocks seems to be overvalued when compared to the market average.
Besides, the Key Performance Indicator too now doesn’t look attractive with P/E more than 67, profit growth -35.11%, and low EBITDA margin of 1.70% over the past 5 years. (Source)
If you ask me, then as an investor I’m appalled at the rise of Heritage Foods stocks. The way it has opened in gaps in the past few days and has almost doubled. I mean there are stocks out there fundamentally strong, technically fine too, and yet somehow it doesn’t pick up including some greatly valued PSUs, and then there are these stocks that shoot up merely on the basis of some news.
Do you buy such stocks?
