Chatha Foods (CHATHA) Concall Report Analysis & Insights

Chatha Foods

| Conference Call Transcript – Feb 26, 2026

BULLISH SENTIMENT

⬤3rd Mar 26

Summary : Chatha Foods projects strong revenue and margin growth driven by new veg and Allana JV facilities, focusing on B2B and export expansion while reducing customer concentration.

Management Perspective positive : Management consistently expresses confidence in their growth strategy, new facilities, and financial targets, using phrases like 'very well-planned growth' and 'sustainable revenue and margin growth'.

Concall Report Analysis & Insights

Business Overview

Chatha Foods is a processed and frozen food company, primarily B2B focused.
They supply major QSR brands like Domino's, Subway, and Taco Bell.
The company offers a diverse portfolio of 194+ SKUs, including flatbreads, gravies, snacks, and meat products.
They operate three integrated manufacturing plants with a total capacity of over 30,800 metric tons per year.
The company has doubled its PAT every year from FY22 to FY25.

Future Growth Prospects

New vegetarian facility and Allana JV plant are expected to drive significant revenue growth.
Targeting +325 Cr revenue for next year, +450 Cr for FY28, and +550 Cr for FY29 at full utilization.
Re-entering the HoReCa segment after 18 years, expecting it to become a significant volume base.
Expanding into exports through the Allana JV, targeting Southeast Asian, Middle East, and African markets.
Developing products for new international QSR chains and private label manufacturing for big brands.

Management Insights

Management emphasizes a strong R&D focus and technical strengths for product development and innovation.
They highlight a robust vendor onboarding process with FSSC 22,000 and BRC certifications for food safety.
Pricing with customers is done annually, based on open book costing and mutual agreement for substantial raw material increases.
New facilities are highly automated, leading to substantial reductions in manpower usage and operating costs.
The company is beefing up its organization across finance, operations, marketing, HR, and technical teams to support massive expansion.

Signs of Skepticism

Initial confusion among analysts regarding EBITDA margin percentages, which management clarified.
Questions about high working capital for a B2C launch, which management clarified is not their primary focus.

Risk Factors

KFC project onboarding is delayed due to a merger between Divyani and Sapphire.
QSR per-store demand is slightly down, though overall store count is increasing.
Raw material price volatility, particularly for chicken, is managed by diverse sourcing.
Customer concentration risk is being actively reduced by expanding to new clients and segments.

Good To Know

Chatha Foods started supplying the Indian Army and ITC, along with Subway, in 2003.
The company's chicken facility operates at 75-80% capacity utilization, expected to increase by 5-10% next year.
The new vegetarian facility is expected to reach 25-30% capacity utilization in the coming year.
The Allana JV facility is projected to achieve around 50% capacity utilization initially, growing to 80% in subsequent years.
Annual maintenance cost for plant and machinery is approximately 1.25% of revenue, or 1.5 Cr annually.

Key Drivers

New veg plant commissioning.
Allana JV export market entry.
HoReCa segment re-entry.
New QSR client onboarding.

Key Analyst Discussions

Competitive Environment

Chatha Foods aims to be one of the largest domestic players with its comprehensive product mix.
Unlisted chicken segment peers include Vista Foods, while Global Gourmet and ID Foods are noted in vegetarian segments.

Market Trends & Consumer Behavior

QSR demand per store is slightly down, but overall store growth by brands mitigates impact.
The company is reintroducing itself to the HoReCa segment after 18 years, expecting significant volume.
Shift from non-veg to veg products is demand-led, focusing on high-volume items initially.

Financial Highlights

FY28 revenue target is +450 Cr, with FY29 projected at +550 Cr at 100% capacity utilization.
Gross margins for non-vegetarian products are 27-28%, vegetarian products 30-32%, and Allana JV 32%.
EBITDA margins are targeted at 15-16% at full capacity utilization.
PAT margins are projected to reach 9-10% by FY29.
Working capital cycle is targeted to be managed within 55 days, with the Allana JV at 30-35 days.

Product Composition

Supplies chicken sandwich fillings, pizza toppings, and taco fillings to QSRs.
Vegetarian products include tortillas, Malabari parathas, frozen-to-fry snacks, and base gravies/pastes.
Product development is primarily driven by QSR marketing teams, with joint development efforts.
Initial focus for the veg facility is on popular, high-volume products rather than innovation.

Strategic Considerations

Current strategy focuses on B2B customers and the export market, not B2C retail brands.
Actively working to reduce dependency on two large customers by onboarding new QSRs and expanding segments.
New facilities incorporate significant automation to reduce manpower costs.
Talent acquisition for senior roles and operational teams is ongoing to support large-scale expansion.