Adani Wilmar shares at Rs 625? Nuvama sees 56% upside on Adani stock

Nuvama Institutional Equities has set a share price target for Adani Wilmar Limited at Rs 625 apiece, which suggests a 56 per cent potential upside for Adani group stock over Monday's closing price of Rs 400.75 on BSE.

Nuvama said Adani Wilmar has among the largest revenues in India’s FMCG sector at Rs 58,200 crore in FY23, up 7 per cent YoY.  Adani Wilmar, Nuvama said, has a market share of 19.5 per cent in edible oil and 7.9 per cent in basmati rice with brighter prospects after Kohinoor takeover.

The Food & FMCG segment swelled 55 per cent to Rs 4,000 crore up 2 times sales in two years. This was fed by a 39 per cent surge in volume, Nuvama said,

"By volume/value, edible oils contributed 61 per cent/79 per cent in FY23 versus 68 per cent/84 per cent in FY22. In B2C, soap sales volume under the Alife brand have been growing fast, crossing Rs 100 crore in revenue in FY23. In the near term, pricing cuts in edible oils remain a concern, but margins are likely to improve in FY24," Nuvama said.

Nuvama said branded products in India are growing faster, compared to unorganised players and loose products in all major segments of essentials, thereby increasing as a share of the overall grocery segment.

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Adani Wilmar being a player in branded products is expected to benefit from it. In the edible oils segment, low per capita consumption and emergence of exotic oils indicate huge headroom for growth. A number of packaged food categories have witnessed a significant increase in the overall branded product usage.

"Adani Wilmar has significant presence in in edible oil (Number 1 player), Wheat flour (Number 2) and Basmati Rice (Number 3). Further, Adani Wilmar is working towards transitioning itself into a foods company and working towards increasing salience of Foods and FMCG," it said.

Nuvama said rural towns are now 30 per cent of sales of Adani Wilmar's packaged oil & foods.

"Adani Wilmar's reaches 1.8mn-plus retailers and touches 114mn-plus households; it has network of 91 depots and 60-plus manufacturing facilities (owned and contracted) and produces 2,000-plus SKUs. Adani Wilmar is strategically focused on increasing direct retail coverage to 1mn retail outlets (currently 0.6mn). It also segregated edible oils and foods distribution in urban areas to enhance salesperson focus," it said.

Nuvama said while Foods and FMCG segment is currently in an investment phase, it expected to contribute meaningfully to Ebitda over coming years. Penetration of branded staple foods is still below 15 per cent, it noted.

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