After jumping around 280 percent in just 2 months, the most recently listed Adani Group stock Adani Wilmar has lost around 30 percent in just 8 sessions.
The scrip has hit its 5 percent lower circuit in the last 5 consecutive sessions but has been in the red on the last 8 sessions, declining as much as 30.6 percent from ₹841 on April 27, 2022, to currently trade at ₹583 on the back of overall weak market sentiment as well as profit booking.
Since listing in February 2022 at ₹221, the stock has surged over 280 percent to ₹841 on April 27. It hit its 52-week high of ₹878 per share on the same day in intra-day deals.
Adani Wilmar, a joint venture between Adani Enterprises Ltd and Wilmar International Ltd, is the owner of the Fortune brand of edible oils.
Amid the recent weakness in stock, brokerage KRChoksey initiated coverage on Adani Wilmar and sees over 20 percent upside from the current levels. The brokerage firm said that the company's raw material sourcing capabilities are supported by extensive business networks.
"We believe Adani Wilmar'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.
It noted that currently, revenue contribution from value-added products is negligible but the management expects it to be meaningful in the medium term
It imports 70 percent of its raw materials, and its market leadership has facilitated to source raw materials from top global suppliers from the international markets, said the brokerage. Further, 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, it noted.
"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 stated.
Recently, Adani Wilmar, the consumer goods company of billionaire Gautam Adani, topped the FMCG chair, dethroning HUL. Its consolidated revenue crossed the 50,000 mark and stood at ₹54,214 crore in 2022 compared to ₹37,090 crore in 2021, registering a growth of 46 percent. While HUL has reported ₹51,468 crore sales in terms of yearly revenue in the financial year 2021-22.
Wilmar's consolidated net profit stood at ₹804 crore in 2022 compared to ₹636 crore in 2021, registering a growth of 26 percent.
JPMorgan, in an earlier report, had said that Adani Wilmar enjoys market-leading positions across kitchen essentials such as branded edible oil, wheat flour and rice, with a large household reach.
"The company's growth strategy is premised on scaling up market share in existing categories, diversification into more FMCG segments, the pursuit of strategic acquisitions (widening product/geographic reach) and an improved margin/return profile over the medium term," the brokerage had stated.
It expects the company's revenue to increase at a CAGR of 19 percent and EBITDA at 24 percent over FY21-FY24E. It further pointed out that edible oil price moves, the scale-up of non-oil staples and potential M&A activity as key share price catalysts for the firm.