Why Adani Wilmar Investors Aren't Too Pleased With Its 6% Increase In Sales Volumes

Adani Wilmar will draw attention on Monday morning after it reports a 15% year-on-year (YoY) decline in standalone sales for the December quarter, despite recording a 6% increase in volumes.

What Happened? The Adani Group joint venture noted flat edible oil volume for the quarter, with a 21% drop in sales value. However, its Food & FMCG segment saw a significant 28% revenue surge alongside an 18% YoY rise in volumes. The industry essentials segment, meanwhile, experienced a 15% jump in volumes but flat sales.

Adani Wilmar Performance Update: Adani Wilmar credits its growth during the quarter to increased penetration of packaged oil and food, particularly during the festive and wedding seasons. The company also experienced robust rural sales and continued demand for branded staples. Despite a 6% overall volume growth, lower edible oil pricing aligned with falling raw material costs resulted in a 15% revenue decline YoY.

In the edible oils segment, flat volume growth year-on-year in Q3FY24 was due to reduced demand from institutional clients, although there was a 9% growth YoY in the first nine months of the financial year 2024 (9MFY24). The Food & FMCG segment reported strong growth in branded products domestically, increasing by 40% YoY or more for the past nine quarters.

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Despite export restrictions impacting the food business, strong domestic sales drove a 28% YoY revenue growth in the Food & FMCG segment for both Q3 and YTD. Adani Wilmar is enhancing its sales capabilities in general trade distribution and focusing on regional approaches for deeper local market penetration. The company aims to more than double its rural town coverage by the end of the financial year, expanding from 13,000 to over 30,000 rural towns.

What do analysts say? Brokerage Nuvama described the Q3 performance as mixed, projecting a 13% fall in consolidated revenue, a 56% decrease in consolidated EBITDA, and an 80% YoY plunge in consolidated profit. Nuvama anticipates a 21% YoY contraction in the value of the edible oils business due to price cuts and softer raw material costs. In contrast, the Food and FMCG business might grow 28%, aided by brands like Kohinoor, while industry essentials are expected to remain flat YoY.

Adani Wilmar shares have seen a 6% drop in the past six months and a 35% decline over the year. Despite this, Nuvama maintains a ‘Buy’ recommendation with a target price of ₹515, citing regional strategies and concerns over edible oil price cuts.

Price Action: Adani Wilmar Ltd. shares were down 1.54% at ₹371.90 on Monday shortly after the market opened for trading.

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