Adani Wilmar down for 8th straight day; slips 34% from 52-wk high level

Post the sharp share price rally since listing, brokerage firm JPMorgan find the stock's risk-reward unattractive. Analysts have downgraded their stance to 'underweight' with a target price of Rs 525.

Shares of Adani Wilmar traded lower for the eight straight day, down 5 per cent at Rs 583.25 on the BSE in Tuesday’ s trade. The stock of Adani Group Company, engaged in edible oil business, locked 5 per cent lower circuit for the fifth straight day. It slipped 34 per cent from its 52-week high level of Rs 878 that it had touched on April 28, 2022 after the company reported a mixed bag of numbers for the quarter ended March 2022 (Q4FY22).

Till 10:41 am; a combined 781,497 equity shares changed hands with pending sell orders of 2.73 million shares on the NSE and BSE. In comparison, the S&P BSE Sensex was up 0.19 per cent at 54,575 points.

Currently, Adani Wilmar is trading under the T group on the BSE and under BE category on the NSE. In the T2T and BE segment, each trade has to result in delivery and no intra-day netting of positions is allowed.

Adani Wilmar is a joint venture between the Adani and Wilmar group, and is India's leading manufacturer of edible oil under the Fortune brand. Besides oil, the company offers products like wheat flour, rice, pulses, sugar and packaged foods.

Earlier, Adani Wilmar raised Rs 3,600 crore through initial public offer (IPO) and debuted bourses on February 8, 2022. The stock had zoomed 282 per cent from its issue price of Rs 230 per share. However, later, it hit an intra-day low of Rs 221 on the day of listing.

For Q4FY22, the net profit of Adani Wilmar fell 26 per cent year-on-year (YoY) to Rs 219.2 crore on the back of higher tax expense. However, the company’s revenue from operations rose 40.2 per cent YoY to Rs 14,960.4 crore. "There was a reduction in rural demand because of inflation," said the company.

Given this, analysts at JPMorgan believe that Adani Wilmar’s acquisition of Kohinoor rice brand rights for India will help consolidate market share in the premium basmati rice segment. While the Q4FY22 operating performance was a mixed bag – as edible oil profits surprised positively helped by higher realizations and low cost inventory, industry essentials saw significant drag from MTM losses. 

"Even as we like the business from a long term perspective, post the sharp share price rally since listing (+228 per cent vs Nifty flat) driving valuations to ~70x FY24E P/E (ex-foods at ~55x P/E), we find risk-reward unattractive and downgrade rating to 'underweight' with new June’23 price target of Rs 525," the brokerage firm said.

However, analysts at KRChoksey Shares and Securities believe that Adani Wilmar’s focus on growth of FMCG and packaged food business and shift to value added products will result in increasing market share and expansion of margins.

"The company has planned capex of Rs 1,900 crore to create in-house capacity for food FMCG, new product launches, exports opportunities, continued expansion of distribution network and further it has kept aside Rs 450 crore for inorganic opportunities, these initiatives will help company to scale faster," the brokerage firm added.