Adani Wilmar is the latest listed firm of the Adani group on the Indian stock market.
Now before we begin our analysis I would like to clarify a few things
- Currently, we don't have the details regarding the shareholding pattern so we should ignore it as of now.
- Since the stock has listed a few days ago only so we don't have much data regarding some parameters.
- And the most important point is a company of Adani group it's gonna get a premium in the market irrespective of its fundamentals.
Now let's start our analysis
- It is a joint venture incorporated in the year 1999 between the Adani group and the Wilmar group.
- Segment-wise revenue breakup
- Edible oil accounts for 65% of total revenue.
- Packaged food and FMCG contribute 11% of total revenue.
- Industry essentials bring in 25% of revenue.
- Adani Wilmar owns the famous brand FORTUNE.
- Adani Wilmar is the largest manufacturer of stearic acid and glycerine in India with a market share of 32% and 23% respectively.
- The company has owned 22 manufacturing plants in 10 states and it also uses 36 leased tolling units.
- The company has a strong distribution network of 5,590 distributors spread across 28 states and 8 union territories of India.
Now we will have a look at the PROS and CONS of the company and then we will try to get to a conclusion.
PROS
(1) Presently it is the leader in the segment of edible oil companies in terms of Market capitalisation.
(2) Company has ROCE of 24% and ROE of 23.9% which is quite good in this sector.
(3) Sales growth 3 years is 12.1% which can be considered good.
(4) Compounded profit growth 3 years is 20% again which is a good figure.
(5) In the past 5 years company has increased its net profit by 2.8X from 230 crores in 2017 to 655 crores in 2021.
(6) In the past 1-year company has significantly reduced its debt from 2300 crores to 1904 crores.
CONS
(1) Stock is trading at PE of 75.6 while industry PE is 27.4 which makes the stock a bit expensive as of now.
(2) Company has DEBT TO EQUITY RATIO of 0.62
(3) Interest coverage ratio is 2.86
(4) Operating profit margin (OPM) is 4% which is quite low.
(5) Cash conversion cycle has increased from 12 days in 2017 to 59 days in 2021 which doesn't sound good.
Now let's try to draw out a conclusion
Since it's an adani group company so definitely it's gonna be more expensive than its peers so it shouldn't bother u much if you are interested in adani group stocks.
If we look at the OPM of its peers then more or less it seems okay.
Debt is the point on which you need to keep a close eye. You should wait for 1–2 quarters and look at its debt whether it is increasing or decreasing because this is what seems to be the biggest problem for me not only with this stock but with all the Adani group stocks.
Finally, I would recommend you to have some patience now before you invest in this stock for the long term for the short term you can enjoy the rally & Exit with good profit on screen.
This is not investing / trading advice one should do his / her research before making any decision.
