Adani Wilmar shares gain 1%; reports strong double-digit volume growth in Q2

Shares of Adani Wilmar rose 1 percent in early trade on October 6. In its Q2 business update, Adani Wilmar reported strong double-digit volume growth as rural sales have seen an uptick. However, in spite of growing volume, the value of sales declined on a year-on-year (YoY) basis. For the second fiscal quarter in FY24, Adani Wilmar’s edible oil segment saw a 5 percent volume growth YoY, but the value growth slipped 19 percent. In Q2, the segment contributed around 74 percent to the company’s standalone revenue.

The food & FMCG business saw a volume growth of 18 percent and a value growth of 25 percent year-on-year. The growth was recorded despite a decline in exports revenue on rice export restrictions. On an LTM basis, the revenue for the food and the FMCG segment is around Rs 4,300 crore.

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The value growth of industry essentials was only 1 percent, despite a 25 percent rise in volume growth YoY. Combined, industry essential and food and FMCG segments contribute 26 percent to Adani Wilmar’s business mix in terms of value.

As a result of modern trade and e-commerce, Adani Wilmar saw high rates of growth in oil and foods. Due to the changing spot and future prices of edible oils, the company reported that the “profitability for the quarter remained under stress.”

Brokerage comments

“We expect consolidated revenue, EBITDA, and PAT to dip 11.4 percent, 1.7 percent, and 26.6 percent YoY respectively. Food and FMCG business is likely to grow 25 percent, aided by scale -up of Kohinoor,” said Nuvama Institutional Equities. The brokerage house added, “EBITDA margins are anticipated to improve ~20 bps YoY and ~100 bps QoQ. Although AWL has been doing well over the years in terms of market share in all categories, there is a near term risk from local players given commodity deflation in edible oils.”

Nuvama maintained its ‘Buy’ call on the FMCG player, with a 12-month target price of Rs 600 per equity share. The closing price of the firm on the NSE as of October 5 was Rs 349.25. This indicated a 71.4 percent upside.

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