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Adani Wilmar shares: ICICI Securities raises target price post Q1 results

1 min read . Updated: 04 Aug 2022, 12:13 PM IST Livemint

ICICI Securities likes the potential in the HoReca segment given Adani Wilmar's key focus in that segment

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Adani Wilmar Ltd (AWL) had a decent quarter with volume growth of 6% from the year-ago quarter and 53% in edible oils and Food and FMCG segments, respectively. This is despite inflation-led consumer slowdown in most staples categories, highlighted domestic brokerage ICICI Securities.

“In terms of prices, while there was some cool-off in edible oil prices (partly driven by government measures as well) the trajectory still continues to be volatile. In terms of demand outlook, festive season and some expected improvement in rural demand (good monsoonled) should aid improvement. Strong competitive advantages (price-laddering, oil segments, scale, market intelligence (courtesy Wilmar)) in edible oil provide Adani Wilmar with an edge over competition," the note stated.

Further, as per the brokerage, Adani Wilmar enjoys multiple synergies across all three business segments which augur well for scale up of packaged foods business – scale in procurement & logistics, brand recall of ‘Fortune’ and readily available distribution and mix-load supply chain benefit from edible oil.

ICICI Securities likes the potential in the HoReca segment given Adani Wilmar's key focus in that segment. “We like the business and have a constructive view. We increase our target price to ₹595 (from ₹550), downgrade Adani Wilmar shares' rating to reduce (from hold) given the sharp run-up (+20% in last 1m)," it added.

Margins for edible oil business saw some contraction in 1Q. The brokerage house noted that this was largely due to inflation in operating costs including power and fuel – other expenses related to plant operations also saw some increase. It believes some of this inflationary pressure should ease going forward, adding that strong continued volume-led growth potential and some respite in inflation should help margin improvement.

Adani Wilmar registered a 10% rise in net profit to ₹193.5 crore in the quarter ending June 30, 2022 as compared to ₹175.7 crore in the same quarter last year. Its consolidated revenue from operations climbed by over 30% to ₹14,731.6 crore in Q1FY23 as against ₹11,312 crore in Q1FY22.

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