Why Adani Wilmar Share Price is Rising

The Adani Group faced a significant challenge last year when Hindenburg Research published a highly critical report alleging financial malpractices.

The Indian stock market was rattled by this revelation, and Adani Group stocks took a significant hit. However, the group demonstrated resilience, weathering the storm and eventually regaining investor confidence.

The recent release of Hindenburg's second report on 12 August 2024, once again cast a shadow of doubt over the Adani Group.

Despite this, the broader market remained resilient, and Adani Group stocks, including Adani Wilmar, have shown a remarkable recovery.

Adani Wilmar's share price has surged by 19.7% in the past month and a further 9.4% in the past five days.

This resilience raises questions about the factors driving this upward momentum. Let's take a look at the factors driving up the rally.

#1 Critical Demerger

Adani Wilmar share price has been rising following Adani Enterprises' recent approval of the demerger of its food FMCG business to Adani Wilmar.

The demerger is expected to unlock direct value for shareholders of the demerged company. It will allow Adani Wilmar to focus on a specialized strategy for sustained growth. This move is seen as beneficial for all stakeholders and those connected to both companies, according to the exchange filing.

The demerger plan also includes Adani Enterprises' strategic investment in Adani Commodities. Adani Enterprises noted that the food FMCG business has become self-sustaining, performing well, and is positioned for further growth under Adani Wilmar.

The company stated that the food FMCG business faces different risks, competition, and opportunities compared to other businesses within Adani Enterprises. The distinct nature of the food FMCG business makes it attractive to a different set of investors, strategic partners, lenders, and other stakeholders.

This is why Adani Enterprises proposed reorganizing and separating the food FMCG business through demerger. The demerger will also create opportunities for independent collaboration and expansion.

#2 Robust Financial Results

Adani Wilmar reported its highest-ever profit after tax (PAT) of Rs 3.1 billion (bn) for Q1FY25, reflecting an impressive growth of 500% YoY. This significant rise in profit can be attributed to stable edible oil prices, which have bolstered the company's profitability over the last three quarters.

The company also achieved its highest-ever EBITDA of Rs 6.2 bn in Q1FY25, a 375% increase compared to the previous year. The surge in EBITDA was driven by the stability in edible oil prices, which provided a strong foundation for growth.

Revenue for the period reached Rs 141.7 bn, driven by a 12% year-on-year volume growth. The strong performance in both the edible oils and food & FMCG segments contributed to this revenue growth. The edible oil segment registered a 12% increase in volume, surpassing 1 million (m) metric tonnes in Q1 FY25. This growth was supported by rising demand and stable prices in the market.

The food and FMCG sales crossed Rs 15 bn in Q1 FY25, with an underlying volume growth of 42% year-on-year. This impressive growth in the food and FMCG segment was fueled by the increasing demand for packaged staple food products.

In the industry essential segment, the Oleo and Castor oil businesses experienced strong double-digit volume growth. However, a decline in the oil meal business slightly impacted the segment's overall growth.

Adani Wilmar's strong business momentum has led to increased market share in key product categories. In the edible oils segment, the company's Refined Oil Consumer Pack (ROCP) market share increased by 0.6% points year-on-year to 19% on a moving annual total (MAT) basis.

In the wheat flour segment, the market share rose by 0.9% points year-on-year to 5.9%. Additionally, the volume of branded exports surged by 36% year-on-year.

Here's a quick summary of the company's segmental financial performance:

Summary of Adani Wilmar's Financial Performance (Q1 FY25)

What Next?

The company's focus on expanding its rural market reach is significant. By aiming to cover 50,000 rural towns by March 2025, Adani Wilmar is setting the stage for increased sales and market share. This expansion could enhance the company's revenue streams and solidify its presence in less penetrated areas.

Additionally, Adani Wilmar is investing in premiumisation. The introduction of high-value products such as "Pehli Dhaar" and a range of specialty flours under the expert brand is expected to drive growth. As consumer preferences shift towards premium and functional foods, these products could contribute positively to margins and overall profitability.

The company's new plant in Gohana, which is set to become operational soon, is another key development.

The company's expansion efforts, premium product offerings, and new plant operations are expected to drive future performance and strengthen its market position.

How Adani Wilmar Share Price has Performed Recently

In the past five days, Adani Wilmar share price has rallied 9.4%. In the last month, it is up 19.7%.

In 2024, so far its share price is up 5.1% and it is up 1.8% in the last one year.

The stock touched its 52-week high of Rs 410 on 6 December 2023 and a 52-week low of Rs 285.6 on 20 November 2023.

About Adani Wilmar

Adani Wilmar is one of the largest fast-moving consumer goods (FMCG) companies in the country.

Its products include edible oil, wheat flour, rice, pulses, and sugar.

The company has products in three broad categories - edible oil, packaged goods and FMCG, and industrial essentials. The majority of its revenue comes from the edible oil segment, followed by industry essentials, and packaged goods.

Fortune oil, its flagship brand, has the highest market share in the oil segment. The company has the largest distribution network among all the branded edible oil companies in India.

In the industrial essentials segment, the company is the largest manufacturer of basic oleochemicals, stearic acid, and glycerin. It's also one of the largest exporters of oleochemicals in India.

For more details about the company, you can have a look at the Adani Wilmar company fact sheet and quarterly results on our website.

You can also compare Adani Wilmar with its peers.

Adani Wilmar vs Patanjali Foods

Adani Wilmar vs NK Industries

Adani Wilmar vs Gokul Refoils

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Happy Investing.

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