Adani Wilmar shares: KRChoksey sees 40% upside despite Hindenburg rout

Adani Wilmar shares bounced back strongly after receiving the heavy beating post-Hindenburg Research report raising concern over debt positioning of Adani group companies. The FMCG stock not just bounced back but it has been able to hold the gains it has registered from its lows. It seems that after the announcement of Q3 results 2023, market is showing confidence in this Adani group stock. KRChoksey believes that Adani Wilmar share price may go up to ₹569 apiece levels in long term, delivering around 40 per cent return to its positional shareholders.

On reasons for being bullish on Adani Wilmar shares, KRChoksey says, “Adani Wilmar Ltd has reported revenue of ₹1,54,381mn, an increase of 4.3% on a YoY basis and

3.9% on a QoQ basis, with volume growth across all the segments and good progress to gain market share across key product categories. Growth was driven by the extension of distribution networks, an increase in direct reach across urban and rural markets, and excellent execution in alternate channels.”

The brokerage went on to add that alternative channels such as E-commerce, Modern Trade, and eB2B have continued to grow at a much faster rate, owing to a shift in customer behavior. The company recognises a large opportunity in the HoReCa (Hotel, Restaurants, and Caterers) segment and is planning to develop an operating model to drive sales in this segment.

On valuations, the brokerage said, “Adani Wilmar has shown strong volume growth in Food and FMCG and Industry Essentials with market share gains in Edible oil, Atta and Rice. The share price has been declining due to various news and reports about the Adani Group; however, we believe that this is temporary and the company will perform well because of the company’s strong and sustainable volume growth. AWL’s focus on penetration-led growth and increasing its reach is yielding results for the company.”

On suggestion to positional investors looking for discounted shopping, KRChoksey said, “We like the company’s strategy of penetration led growth, focus on the international market, increasing distribution reach, timely capacity addition to supporting the growth, new product launches, and acquisition of the Kohinoor brand. We expect Adani Wilmar to benefit from the recent uptick in demand. Currently, the stock is trading at a PE multiple of 64.8x/41.9x/34.6x based on our FY23E / FY24E / FY25E EPS estimates, respectively. We assign a PE multiple of 50x to FY25 EPS of ₹11.4 an revised our target price of INR 569/share(Previous TP: 751) and change our recommendation from ACCUMULATE to BUY.”

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