Adani Wilmar Q3 results a positive surprise after quarters of pain; share price target Rs 480: Nuvama

Adani Wilmar reported a 18.29 per cent drop in its year-on-year (YoY) consolidated net profit at Rs 201 crore for the December quarter on 16.91 per cent fall in sales at Rs 12,828 crore, beating analyst estimates. Ebitda margin of 3.9 per cent came in better than estimates, said Nuvama Institutional Equities, which has lowered its target on the stock to Rs 480 from Rs 515 earlier. The brokerage said the results were a positive surprise after many quarters of pain.

What Nuvama liked in Adani Wilmar's Q3 results was its Food and FMCG business performance, which now contributes 17 per cent of volumes and 10 per cent of value to the business. For the third quarter, the FMCG business clocked 17 per cent growth in volume and 25 per cent YoY value growth in Q3FY24.

"It is a positive sign as Adani Wilmar's strategy is to focus on positioning itself as a foods business. Industry Essentials contributed 22 per cent/14 per cent to volumes/value and clocked 17 per cent YoY volume growth in Q3FY24, led by robust growth in Castor and Oleochemical businesses. In Q3FY24, Adani Wilmar increased its direct reach by 30,000-plus outlets and added 1000-plus rural towns, implying its efforts on deepening its existing penetration and expanding its distribution network," Nuvama said.

During the quarter, Adani Wilmar's market share improved in edible oil and wheat to 19.8 per cent and 5.4 respectively. Branded oil and foods performed well on the back of strong demand from festive and wedding season, Nuvama said.

What it did not like was a volume/value decline of 2 per cent/23 per cent YoY in Edible oil segment (62 per cent of mix) due to destocking on falling oil prices. Profitability of Bangladesh subsidiary continued to be under stress due to local currency issues.

"During the quarter, Adani Wilmar lost market share in rice by 170 bps QoQ. Industry Essentials segment clocked flat revenue growth during the quarter. Export ban on basmati and non-basmati rice continued during the quarter," the brokerage said.

Nuvama said given softening inflation in H2FY24/FY25, and passing on of price benefits in edible oil, it has cut its FY24E/25E/26 revenue estimates by 8 per cent each, which flows down to Ebitda cut of 45 per cent/12 per cent/3 per cent, yielding a revised target price of Rs 480 against Rs 515 earlier.

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