Adani Wilmar Q1 results: Adani firm may report single-digit rise in profit, says Nuvama

Adani Wilmar Ltd is likely to report a single digit rise in profit for the June quarter. Earlier, the Adani group firm had in a business update said its sales fell 15 per cent on year-on-year (YoY) basis due to a sharp decline in edible oil prices, even as volumes jumped 25 per cent for the quarter. Edible oil and industrial essentials segments witnessed 15 per cent de-growth in revenues, the company said earlier.

Analysts at Nuvama Institutional Equities noted that Adani Wilmar saw a strong growth in edible oil volumes due to a low base in the year-ago quarter, which was disrupted by steep edible oil prices since the onset of the Russia-Ukraine conflict. However, edible oils also have seen pricing cuts to the tune of 30-40 per cent YoY given that raw material deflation is a pass through to consumers, it noted.

"Due to this, revenues shall see a dip. Even other players such as Marico witnessed 30 per cent pricing drop in Saffola edible oil during the quarter. With this, we revise our estimates and expect revenues to dip by 15 per cent YoY (versus initial expectation of 5.4 per cent)," Nuvama Institutional Equities said.

The domestic brokerage said it expects Ebitda for Adani Wilmar to grow 10.9 per cent while it sees profit after tax growing at 5.6 per cent YoY against initial expectations of 13.2 per cent and 2.1 per cent YoY growth, respectively.

"We expect edible oils/industry essentials to slip 16 per cent/21 per cent YoY. Foods/FMCG will likely grow 24 per cent YoY. Recent acquisition of Kohinoor is increasing AWL’s presence in MT and select GT stores. We expect gross margin to Ebitda to improve by 116 bps/92bps YoY (60 bps YoY gross margin expansion. Overall, volume growth of 25 per cent has been ahead of our expectations aided by soft base," the brokerage said.

In the case of Food and FMCG segment, value and volume growth are expected to be at 30 per cent and 20 per cent, respectively. This, Nuvama said, would be fuelled by rapid growth in sales of branded products in the domestic market. The shift in consumer preferences from unbranded to branded products is leading quicker growth, it said.

Also read: Hot stocks on August 2, 2023: IRFC, Hawkins Cookers, Reliance Power, Sula Vineyards and more

In the Industry essentials segment, volume growth is expected to be 20 per cent YoY, primarily driven by good crush operations and exports of animal feed products. However, value decline is expected to be 15 per cent YoY, on back of steep correction in prices of oleo and castor products, which together contributes around 70 per cent of the segment’s revenue, Nuvama said.

Unseasonal rains and hailstorms in key wheat producing states and price cuts in edible oil remain key concerns, the brokerage said in a July note.

Also read: Rs 63 to Rs 393: This stock turned into a multibagger in three years; Q1 earnings beat estimates

Also read: Larsen & Toubro shares to turn ex-dividend today. Key details