Adani Wilmar stock has more than tripled in over two months. The stock of edible oil manufacturer listed at Rs 221 on February 8 this year. It closed at Rs 764.60 in the previous session, delivering 245.97 per cent returns to investors over the listing price.
The recent proposal to ban palm oil exports by Indonesia from April 28 will push the prices of edible oils higher, which have already been on the boil due to the ongoing Russia-Ukraine war.
The announcement to ban exports till further notice is aimed at containing edible oil prices in the Indonesian domestic market. India sources 45 per cent of its annual palm oil needs from Indonesia. The ban is likely to raise margins for edible oil producers at home such as Adani Wilmar which will positively affect sentiment in the stock.
However, experts say that Adani Wilmar stock is overbought which could affect the rally.
AR Ramachandran, Co-founder & Trainer, Tips2Trades said, "A ban on cooking oil exports from Indonesia, rising inflation and subsequent pricing power in edible oils has pushed Adani Wilmar stock to an all-time high. Technically, the stock is over-bought and investors should keep booking profit till Rs 812. Fresh buying can be initiated only near Rs 520-Rs 545 levels."
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The rise in prices of domestic edible oil prices is likely to add to earnings per share for the Adani Group firm.
Rajesh Sinha, Senior Research Analyst, Bonanza Portfolio said, "Adani Wilmar stock has risen majorly due to geo-political tensions giving a push to commodity prices. The Russia-Ukraine war has pushed commodity prices higher worldwide, especially the edible oil prices. Ukraine is one of the biggest exporters of soybean seed and oil and the war has disrupted the entire supply from Ukraine. Adani Wilmar's unsold inventory is expected to benefit going ahead due to this supply-side disruption."
"It is believed that palm oil prices will remain on the higher side leading to sharp upside in the margin of Adani Wilmar. We believe that Adani Wilmar may report a decent EPS growth going ahead which will reflect in its share price also. We can consider this stock for long-term investment and any dip in the share price will be a great opportunity to enter," Sinha added.
Also read: Edible oil stocks rise up to 10% after Indonesia bans export of palm oil
Prashanth Tapse, Research Analyst and VP Research at Mehta Equities said, "Adani Wilmar is in action majorly due to geo-political tensions, giving a major push to commodity prices especially the edible oil prices. Ukraine is the biggest exporter of soybean seeds and oil. The war had disrupted the entire supply from Ukraine and other large players such as Adani Wilmar got undue inventory advantage with a rise in prices globally.
Post war, the recent news on the proposal to ban palm oil exports by Indonesia from April 28 pushed edible oil prices higher and this rise is likely to give windfall benefit for domestic edible oil producers and add additional margins in the coming earnings.
Hence, Adani Wilmar is trading higher in demand. We advise investors to book 30% to 40% of the holding around Rs 840-850 levels. If anyone wishes to buy fresh at current levels, better to wait for buy on dip opportunity to accumulate in the long term."
The stock hit upper circuit of five per cent and ended at the same level in the previous session. Market cap of the firm stood at Rs 99,373 crore on BSE.
The company made a muted market debut on February 8.
Shares of Adani Wilmar listed at Rs 221, a 3.91 per cent discount to their IPO issue price on BSE. The issue price of the IPO stood at Rs 230.
The firm offered its shares in a price band of Rs 218-Rs 230.
Domestic brokerage Edelweiss Research is of the view that the stock's bull-run may come to an end. It has initiated coverage on the stock with 'hold' and a target price of Rs 559 over the next 12 months.
Edelweiss Research said that while the company has strong growth visibility, the gains in the stock following listing suggest that it is already priced in.
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In March, global brokerage JP Morgan said that the stock was perfectly priced now. The brokerage has a 'neutral' rating with a base case March 2023 target price of Rs 367 on the stock.
Adani Wilmar logged a 66 per cent year-on-year rise in its consolidated net profit at Rs 211 crore for the quarter ending December 31, 2021 against net profit of Rs 127 crore in the year-ago period.
Revenue from operations climbed 40.5 per cent to Rs 14,379 crore in the quarter under review compared to Rs 10,229 crore in the same quarter last fiscal. FMCG revenue zoomed 46 per cent to Rs 703 crore.
Adani Wilmar Ltd is a joint venture between Adani Group and Wilmar Group of Singapore. It is engaged in the manufacturing of edible oil, wheat flour, rice, pulses and sugar. The company also owns the popular brand Fortune, which is the largest selling edible oil brand in India.
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