Adani Wilmar hits fresh lifetime high; stock zooms 30% in one week

The stock of Adani Group company has zoomed 136 per cent from its issue price of Rs 230 per share

Shares of Adani Wilmar (AWL) hit a new lifetime high of Rs 543.35 as they were locked at 5 per cent upper circuit for a second straight day on the BSE on Friday. Till 10:08 am, a combined 13.32 million equity shares had changed hands and there are pending buy orders for around 7 lakh shares on the NSE and BSE.

In the past one week, the stock of Adani Group edibles oil company has surged 30 per cent as compared to 2.3 per cent rise in the S&P BSE Sensex. It has zoomed 136 per cent from its issue price of Rs 230 per share. AWL had raised Rs 3,600 crore through initial public offer (IPO) and had debuted on thr bourses on February 8, 2022.

AWL enjoys market-leading positions across kitchen essentials: branded edible oil, wheat flour, rice, etc., with a large household reach. Its 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.

In its quarterly results after listing on stock exchanges, AWL reported a 66 per cent quarter-on-quarter (QoQ) growth in its consolidated net profit of Rs 211 crore for the third quarter ended December 31, 2021 (Q3FY22). The company's consolidated revenues grew 41 per cent QoQ at Rs 14,379 crore.

During the quarter, AWL achieved an overall sales volume of 1.26 million metric tonnes (mmt) of which food as well as fast moving consumer goods (FMCG) vertical achieved volumes of 0.17 mmt, even as the company added five new Fortune Mart stores. As part of its growing foothold across South-East Asia, AWL acquired Bangladesh Edible Oil Limited (BEOL), by taking 100 per cent stake in Adani Wilmar Pte Ltd (AWPTE), a holding company of BEOL, AWL said.

"As the largest edible oil manufacturer (~19 per cent share) with access to the global linkages of Wilmar (owns 44 per cent stake), AWL enjoys significant sourcing (strong relationships with leading suppliers, units closer to ports), supply chain and scale advantages over domestic peers to ensure an efficient cost structure that is important for a low-margin business," analysts at JP Morgan said.

AWL is also leveraging existing manufacturing, supply chain, logistics and distribution infrastructure for a faster scale-up of new food forays. Oleochemicals (significant capacity addition) and overseas expansion (Bangladesh, though the near-term outlook is subdued owing to price caps) are the other potential mid-term growth drivers, the brokerage firm said in a recent report with a 'neutral' rating on the stock.

Meanwhile, Russia‐Ukraine together supply about 90 per cent of the world's sunflower oil which constitutes about 10‐12 per cent of India's edible oil consumption basket.

"With that supply being disrupted, consumers are expected to shift their consumption to alternatives like Soyabean, Groundnut and Mustard oil, albeit at higher prices given the 15‐30 per cent inflation seen in prices of alternate oils post the war commenced," analysts at YES Securities said in a company update.

AWL, the brokergae said, should not get impacted by the shortage given its diversified product profile and premium brand positioning. Company has already procured enough inventory to mitigate near‐term supply chain disruptions and expects share gains as smaller players may struggle owing to supply chain and liquidity challenges.

"Management reiterated that as its portfolio straddles across oil categories and it has been able to pass on the inflation, it should be able to clock 6‐8 per cent volume growth against industry average of 2 per cent in edible oils, with 30 per cent expected growth in the foods business and 8‐10 per cent growth in the industry essentials business with stable profitability across all business segments," the brokerage firm added.

Tech View

Adani Wilmar

Outlook: Cautiously optimistic

The stock of Adani Wilmar is exploring an uncharted territory. With today's fresh lifetime high, the stock has broken above the upper-end of the Bollinger Band on the daily charts, rising above the resistance level of Rs 531. The immediate support remains at Rs 451.

Besides, even though the recent sharp rally pushed the stock in the overbought zone on the daily charts on March 23, it has sustained its uptrend and has risen about 30 per cent since then. This suggests that bulls have decent control over the stock.

Other momentum oscillators such as Directional Index and MACD are also showing positive trend in the stock. However, slow Stochastic indicator suggests breather in the rally in the near-term.

(With inputs from Nikita Vashisht)