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KRChoksey initiates coverage on Adani Wilmar; here's why it sees over 20% upside

KRChoksey initiates coverage on Adani Wilmar; here's why it sees over 20% upside

The Adani group stock has been on a selling spree after the company posted numbers for the quarter ended March 2022. 

KRChoksey initiates coverage on Adani Wilmar; here's why it sees over 20% upside KRChoksey initiates coverage on Adani Wilmar; here's why it sees over 20% upside

Brokerage firm KRChoksey believes that Adani Wimar is in the sweet spot to take advantage of the prevailing opportunities and can grow multifold. It has an “ACCUMULATE” rating on the stock with a target price of Rs 734 per share.

The Adani group stock has been on a selling spree after the company posted numbers for the quarter ended March 2022. 

It hit an all-time high of Rs 878.35 on April 28, 2022. The scrip was down 5 per cent to hit an intraday low of Rs 613.90 on BSE. The market cap of the company fell to Rs 79,787.27 crore. So, if you compare it with the current market price, the stock has an upside potential of over 20 per cent.

The brokerage firm noted that the company’s raw material sourcing capabilities are supported by extensive business networks. It imports 70 per cent of its raw materials, and its market leadership has facilitated to source raw materials from top global suppliers from the international markets.

Also, Wilmar International is the largest palm oil supplier in the world and provides it with an additional competitive edge as it need not depend on third-party suppliers for sourcing palm oil.

"We believe AWL’s focus on the growth of FMCG and Packaged food business and shift to value-added products will result in increased market share and expansion of margins," KRChoksey said.

"Currently, revenue contribution from value-added products is negligible but the management expects it to be meaningful in the medium term, it added.

"Further, the company paid off its long-term debt from IPO proceeds. AWL has been able to generate strong cash flow which along with a reduction in debt will further, strengthen its balance sheet," the brokerage firm further added.

Adani Wilmar reported a profit of Rs 234.3 crore for the quarter ended March 2022 against a net profit of Rs 315 crore in the year-ago period.

However, the company clocked a 40 per cent YoY rise in its consolidated revenue from operations to Rs 14,960.4 crore in Q4 against Rs 10,672 crore in the same quarter last fiscal.