Post Adani Wilmar's March quarter provisional business update, Nuvama Institutional Equities expects the Adani group firm to log a 4 per cent drop in sales for the quarter. This is slightly less than the brokerage's expectations of 5 per cent YoY fall. Nuvama sees Adani Wilmar Ltd posting an Ebitda growth of 43 per cent YoY and margin expansion of 126 basis points YoY.
"AWL achieved its highest-ever volume during the quarter and continued to gain market share. It will keep using regional approaches to push deep penetration. Retain ‘BUY’ with a target of Rs 480," the brokerage said.
Net-net, Nuvama sees consolidated revenue falling 4 per cent YoY for FY24. Ebitda may jump 43 per cent YoY. Nuvama anticipates the edible oils business to contract 4 per cent YoY by value due to price cuts in edible oil in the wake of softer raw material costs.
The Food & FMCG business is likely to grow 18 per cent YoY, aided by Kohinoor; whereas the industry essentials segment may suffer a double-digit decline.
Nuvama said Ebitda margin is likely to improve 126 bps YoY, but shall stay flat QoQ. Although Adani Wilmar has been doing well over the years in terms of market share across categories, there is a near-term risk from local players owing to commodity deflation in edible oils, Nuvama said.
Nuvama said Adani Wilmar's standalone Q4 volumes are likely to increase 4 per cent YoY. It expects edible oils segment to see a contraction of 4 per cent YoY in value terms, whereas the Food & FMCG business could report 18 per cent value growth. Industry essentials had a weak quarter, posting a 21 per cent decline in volume and 15 per cent fall in value, it said.
In the case of edible oils, the segment registered volume growth of 13 per cent YoY, but value contraction of 4 per cent YoY on a standalone basis. The growth was driven by increased retail penetration in under-indexed markets and the festive season.
"In FY24, branded sales in edible oils grew at a faster rate of 15 per cent compared with the overall segment growth of 10 per cent YoY. FY24 had lower edible oils prices compared with FY23, leading to lower revenue despite growing volumes," Nuvama said.
In the Food & FMCG segment, the business turned in a strong showing with value/volume growth of 18 per cent/10 per cent YoY driven by strong domestic sales, despite the negative impact of continued export restrictions.
In strong markets of edible oil, the Food segment is leveraging the outlet penetration to drive growth. Revenue from branded products in the domestic market has been growing at 30%-plus YoY for the last ten quarters. The revenue in this category has nearly doubled to ~INR4.7bn within two years in FY24," it said.
The industry essentials category’s volume/value contracted 21 per cent/15 per cent YoY.
"The company has made significant improvement to its distribution infrastructure in the southern region. Various initiatives such as regional marketing communications have resulted in market share gains in Sunflower oil. The HORECA segment crossed INR4bn in revenue in FY24—within a year and a half of setting up a dedicated HORECA distribution channel. This segment has an estimated addressable market of INR 650bn-plus for edible oils and foods," Nuvama said.