Shares of Adani Wilmar, which are down 56 per cent from their 52-week highs, have potential to test Rs 569 level, said KRChoksey Shares and Securities in a note. The target suggests a 43 per cent potential upside for the Adani group stock from Wednesday’s closing price of Rs 397.25. KR Choksey said Adani Wilmar shares have been declining due to various reports about the Adani Group, but it believes that this is temporary and the company will perform well because of strong and sustainable volume growth.
Adani Wilmar’s focus on penetration-led growth and increasing its reach is yielding results for the company, it said.
“We like the company’s strategy of penetration-led growth, focus on the international market, increasing distribution reach, timely capacity addition to supporting the growth, new product launches, and acquisition of the Kohinoor brand. We expect Adani Wilmar to benefit from the recent uptick in demand,” it said.
At present, the scrip trades at a PE multiple of 64.8 times FY23 EPS estimates, 41.9 times FY24 estimates and 34.6 times FY25E EPS estimates. KR Choksey has assigned a PE multiple of 50 times to FY25 EPS of Rs 11.40 and suggested a revised target price of Rs 569 per share from Rs 751 earlier. It changed the rating for the stock to ‘Buy’ from ‘Accumulate’.
Since the Hindenburg report came out, shares of Adani Wilmar have risen only in four sessions. They hit a one month low of Rs 361.40 recently.
KR Choksey said Adani Wilmar has shown strong volume growth in Food and FMCG and Industry Essentials segments, with market share gains in edible oil, atta and tice. It noted that Food and FMCG segments registered a growth of 26 per cent on a YoY basis in volume; Industrial Essentials volume grew 38 per cent on a YoY basis and for Edible Oil, it was up 9 per cent on a YoY basis, the brokerage said.
“Alternative channels such as E-commerce, Modern Trade, and eB2B have continued to grow at a much faster rate, owing to a shift in customer behaviour. The company recognises a large opportunity in the HoReCa (Hotel, Restaurants, and Caterers) segment and is planning to develop an operating model to drive sales in this segment,” the brokerage noted.
Recently, Nuvama Institutional Equities said that Adani Wilmar competes in an extremely competitive business but it delivered strong volume growth across segments in December quarter. It cut its earning estimates for FY2-FY25 by 4.4-8.2 per cent and rolled over its estimates to FY25E with a new price target of Rs 680 from Rs 708 earlier. This price target in fact suggests a 70 per cent potential upside for the stock.
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