05 Apr , 2022 By : Kanchan Joshi
Adani Wilmar is the leading player in the edible oils market in India. Its key strengths include a strong distribution network, with plans to increase overall distribution over the next 3-4 years, strong brand and market leadership, integrated manufacturing facility that helps drive cost efficiencies across its different business lines, and well entrenched promoter group, highlighted brokerage Edelweiss.
“The above factors will enable Adani Wilmar clock volume and earnings CAGR of 9.3% and 19.9%, respectively, over FY21-24E. However, following a spectacular 140% gain post listing, the market is already factoring-in robust growth," the note stated. Hence, the brokerage has initiated coverage on Adani Wilmar shares with ‘Hold’ rating and a target price of Rs559.
The Adani Group stock has given multibagger return since its listing in February 2022 by rallying more than 109% in the last 2 months. Adani Wilmar is a joint venture between Adani Group and Wilmar Group of Singapore.
“All in all, we are enthused by the strong growth visibility. However, in our SoTP based valuation, higher margin volatility ushers us to value the company at a discount to the consumer staples companies in our coverage. The return ratio profile is decent, albeit lower than the sector average," the domestic brokerage and research firm Edelweiss added.
The brokerage expects the edible oil and packaged food industry to maintain its strong growth trajectory, riding the increasing penetration of branded players, growth of the enduser industries and the growing export market.
It believes that Adani Wilmar is well placed to capture this opportunity given the aforementioned moats. Further, the company’s scale is a formidable competitive advantage, providing benefits in both sourcing and optimising overheads. However, Edelweiss said that an anticipated sunflower oil shortage, arising out of the Russia-Ukraine conflict, is a near-term risk.
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