Adani Wilmar navigated edible oil price fluctuations in Q2FY24, maintaining a balance between volumes and revenue.
Company Overview:
Adani Wilmar operates in the FMCG sector, focusing primarily on edible oils and food & other FMCG segments. The company also plays a vital role in industry essential segments such as castor, oleo, and de-oiled cake. Well-known brands under the company’s umbrella include Fortune, King’s, Kohinoor, Charminar, Jubilee, etc. As of Q2FY24, the company boasts a direct reach to over 6.5 million outlets, covering 26,500+ rural towns, indicating an aggressive expansion strategy in rural areas for future growth. Adani Wilmar owns 23 manufacturing units and leases 38, with a total refining capacity of 5.5 million tonnes and a food capacity of 0.9 million tonnes per annum.
Market leader in Edible oil – 19.6% market share
As of September 2023, Adani Wilmar holds the highest market share of 19.6% in the edible oil sector, securing a position in the top 3 for all edible oils, including Soyabean, Sunflower, Palm, Mustard, and Ricebran. The company also stands at the second and third positions in wheat flour and basmati rice, with market shares of 5.15% and 7.40%, respectively. Despite a slight dip in basmati rice market share from 9.4% in Q2FY23 to 7.4% in Q2FY24, wheat flour has seen a gain of 15 basis points, reaching 5.15% in Q2FY24.
Volumes were higher YoY for all segments, revenue was impacted by the decline in edible oil prices:
While Q2FY24 witnessed an 11% YoY growth in volumes (with a minor 2% QoQ dip to 1.5 MMT), revenue experienced a 13.3% YoY decline and a 5.1% QoQ decrease, amounting to INR 12,267 Crores. The decline in edible oil prices in Q1FY24 and Q2FY24 contributed to a 19.4% reduction in revenue for the edible oil segment. Despite a 3.7% YoY growth in volumes (and a 4.5% QoQ decline), the edible oil segment revenue reached INR 9,037 Crores. Conversely, the food & FMCG segment saw a 26.4% YoY revenue growth (16.9% QoQ) to INR 1,283 Crores, while the industry essentials segment experienced a 1.7% YoY increase but a 1.9% QoQ decline, reaching INR 1,947 Crores.
Valuation and Key Ratios:
Adani Wilmar is currently trading at a multiple of 206x EPS(TTM) at a market price of INR 291, while the industry PE stands at 33.6x. The company’s trading value is 4.75 times its book value, amounting to INR 61.3 per share. The return on equity is at 7.4%, and the return on capital employed stands at 15%. In the EV/EBITDA multiple, Adani Wilmar holds the third position among top peers, with a multiple of 25.4x. In Q2FY24, the interest coverage ratio stood at 0.22x due to a high debt of INR 220 Crores, indicating lower solvency while EBIT stood at only INR 48 Crores.
Q2FY24 Results Updates: Consolidated
➡️ In Q2FY24, revenue declined by 13.3% YoY (-5.1% QoQ) to INR 12,267 Cr, impacted by a correction in edible oil prices. However, volumes grew by 11% YoY (-2% QoQ) to 1.5 MMT.
➡️ EBITDA witnessed a 10.1% QoQ growth but declined by 43.4% YoY to INR 144 Cr. The EBITDA margin stood at 1.17%, contracting by 62 bps YoY and expanding by 16 bps QoQ.
➡️ Operating Profit (EBIT) grew by 29.9% QoQ but declined by 70.7% YoY to INR 48 Cr. The EBIT margin expanded by 10 bps QoQ but contracted by 77 bps YoY, reaching 0.39%.
➡️ PBT was at INR -172 Cr, impacted by higher interest costs of INR 220 Cr (34.8% YoY/29% QoQ).
➡️ PAT grew by 65.6% QoQ but declined by 368.1% YoY to -INR 130.7 Cr due to poor revenue growth and higher interest costs. Earnings Per Share (EPS) for the quarter stood at -INR 1.01 (PQ -0.61 Rs).
Conclusion:
Adani Wilmar, a prominent player in the FMCG sector, faces challenges with a YoY decline in revenue primarily attributed to the correction in edible oil prices. Despite volume growth and a strong market position in edible oils, the company grapples with higher interest costs impacting profitability. Investors should monitor the company’s efforts to navigate market dynamics and manage debt levels for sustainable growth in the future.
