Wednesday’s stock had stood at Rs 636 each. It rose 15% last week against a decline of up to 2% in benchmarks.
Edelweiss Research said while the company has strong growth visibility, the stock’s post-listing gains suggest it is already priced in. Since early February, the stock has offered a 176% return to investors. Last month, global brokerage JP Morgan, in its hedging initiation report, also said the stock was now perfectly priced. This brokerage has a “neutral” rating with a March 2023 base target price of Rs 367 on the stock.
Adani Wilmar, a 50/50 joint venture between Adani Enterprises and Wilmar International, is among the largest FMCG companies in India. It is known for its wide range of edible oil offerings including soybean, sunflower, mustard and rice bran, among others under its well-established “Fortune” brand.
“A strong distribution network, brand and market leadership, an integrated manufacturing facility that helps reduce costs, and a well-established group of promoters will help Adani Wilmar achieve volume and profit CAGR of 9.3 % and 19.9%, respectively, in fiscal year 21-24E,” the brokerage said.
Edelweiss Research said the edible oil and packaged food industry is expected to maintain its strong growth trajectory, and Adani Wilmar is well positioned to seize this opportunity. Given Adani Wilmar’s strong brand and distribution reach, he expects the food segment to grow 31% CAGR between FY21-24E. It sees edible oil volumes growing at 7.4% CAGR in fiscal year 21-24E.
“We are excited by the strong growth visibility, however, in our SoTP-based valuation, the higher margin volatility prompts us to price the company at a discount to the consumer staples companies in our coverage. of the yield ratio is decent, albeit below that in the industry average Overall, following a dramatic post-listing gain (stock traded at 66.5x and 56.2x FY23E and FY24E P/ E), the market is already pricing in robust growth, so we are initiating a hedge with HOLD,” he said. .
An anticipated shortage of sunflower oil, resulting from the Russian-Ukrainian conflict, is a short-term risk for the company, he added.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)