Accumulate This Multibagger Adani Group Stock, Shares Can Jump 10%, Says KR Choksey

KR Choksey in its recent report has rated Adani Wilmar Limited (AWL) "Accumulate" with a Target Price of Rs 751 per share. The stock is expected to jump 10% from its current level considering the given target price. Adani Wilmar is Adani and Wilmar Group's joint venture company. It is a large-cap FMCG sector company with a market cap of Rs 88,898.02 crore. It is one of the largest FMCG companies in India. The company is a provider of edible oil vanaspati and specialty fats. The company recently opened its IPO, and got listed on 08 February 2022.

Stock Outlook & Returns

The stock of Adani Wilmar today fell 0.8% ending at the current market price of Rs 684 per share on NSE. Its previous close was Rs 684.55 per share, while today it opened at Rs 687.90 per share. According to NSE, the stock's 52-week high level is Rs 878 recorded on 28 April 2022 and the 52 week low is Rs 227 recorded on 08 February 2022, respectively.

The stock in the past 1 week surged, giving a return of 1.73%, whereas in the past 1 month the stock fell by 8.92%. In the past 3 months, the stock has given 1.41% positive returns. In 6 months, the stock has given 5.85% positive returns. Since its listing, it has given multibagger returns of 154.99% on investments.

Volume growth continues with market share gain

Adani Wilmar Ltd. (AWL) reported revenue growth of 4.3% YoY/-3.9% QoQ to INR 1,41,500 Mn in Q2FY23. Volumes grew by 9% YoY primarily led by strong growth in Food and FMCG and Industry Essentials. Food and FMCG registered a growth of 41% YoY, Industrial Essentials volumes grew by 21% YoY while Edible Oil de-grew by 1%. Edible Oil volume remained flat due to sluggish demand in the semi-urban and rural markets. In H1FY23, the company registered 12% volume growth, 17% revenue growth led by strong Food and FMCG demand. AWL's strategy of growing the Food and FMCG business by driving its penetration through the distribution strength of the Edible Oil business is yielding results. Despite several challenges, the company increased its market share in Edible Oil by 3o bps to 18.5%. Fortune Atta continued to gain market share reaching 4.9% as against 3.9% YoY. During the quarter, the volume share of Food and FMCG has gone up to 16% and the company expects to take it to 30% over the next few years. 

Multiple headwinds impacted the margins

EBITDA for the quarter stood at INR 2,538 Mn, registering a de-growth of 41% YoY/42% QoQ. EBIDTA Margin for the quarter came at 1.8% a contraction of 137 bps YoY and 122 bps QoQ. Net Profit for the quarter came at INR 487 Mn against INR 1,823 Mn in Q2FY22, de-growth of 73% YoY. Multiple headwinds including high volatility in Edible Oil prices, allotment of lower TRQ (Tariff Rate Quota) and inflation impacted the margins of the company. During the quarter, the company witnessed multiple headwinds impacting the demand-supply situation in Edible oil. Sharp price decline in sunflower oil, palm oil and soyabean oil left the company with high price inventory. AWL passed on the benefits of lower prices to the consumers. 

Valuation and view

Adani Wilmar has shown strong growth volume growth in Food and FMCG and Industry Essentials with market share gains in Edible oil, Atta and Rice. Multiple headwinds impacted the margins of the company during the quarter. AWL's focus on penetration led growth with increasing its reach is yielding results for the company. "We like company's strategy of penetration led growth, focus on international market, increasing distribution reach, timely capacity addition to support the growth, new product launches and acquisition of Kohoinoor brand. We expect Adani Wilmar to benefit form the recent uptick in demand due to festivities and weddings along with softening of commodity prices. The company is expected to sustain its growth momentum along with improvement in margins with inflationary pressure easing. We continue with "ACCUMULATE" rating on the stock with target price of INR 751 (unchanged) per share, giving 9.8% upside from current levels," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of KR Choksey. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.