Adani Wilmar shares at Rs 680? Nuvama’s price target post Q3 results suggests 62% potential upside
Adani Wilmar reported a good set of December quarter results. Nuvama Institutional Equities said Food and FMCG business is now contributing 15 per cent of volumes and 7 per cent of value, a positive sign, as the Adani group company’s strategy is to focus on positioning itself as a foods business. What the brokerage did not like was the 8 per cent YoY drop in realisation per tonne. The domestic brokerage has cut its target on the stock to Rs 680 from Rs 708 earlier, which still suggests a potential 62 per cent rise over Wednesday’s closing price.
On Thursday, the scrip rose 5 per cent to hit a high of Rs 440.30.
Nuvama said the company’s wheat flour and rice offerings have been growing well on the back of increased distribution reach and new product launches. Adani Wilmar has continued to gain market share in edible oil, which is the major revenue contributor, with volume growth of 9 per cent YoY despite weak demand for baking and frying industry. Alternate distribution channels(other than GT) registered a strong YoY volume growth of 32 per cent YoY, it said.
The management argued that gross profit/tonne (up 5 per cent YoY) and PBT/tonne (up 2 per cent YoY) was more relevant.
“Increase in the benchmark rates increased the interest cost for the quarter and is expected to be more or less similar. Bangladesh operations reported loss in Q3 driven majorly due to unfavourably forex impact and price caps on edible oil by government. Additional 20 per cent duty on rice led to slowdown in rice exports,” Nuvama said.
Nuvama said while Adani Wilmar competes in an extremely competitive business (edible oil and foods/FMCG), it has consistently delivered strong volume growth across segments. The brokerage has cut its FY23E-FY25 by 4.4-8.2 per cent with a roll over to FY25E, yielding a target of Rs 680.
Adani Wilmar had on Wednesday reported a 16 per cent year-on-year (YoY) rise in consolidated net profit at Rs 246 crore for the December quarter compared with Rs 211 crore in the corresponding quarter last year. Revenue for the quarter advanced 7 per cent YoY to Rs 15,438 crore compared with Rs 14,371 crore in the same quarter last year. The Adani group company said volume for the quarter grew 16 per cent YoY, thanks to large opportunity available in the packaged food industry.
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