AWL - AWL AGRI BUSINESS LIMITED Share Price

During the Q3 FY '26 earnings call, management of AWL Agri Business Limited provided a positive outlook and highlighted key operational metrics. Revenues grew by 10%, while overall volumes increased by 3% year-on-year. Core brands, particularly the Fortune brand, showed robust growth of 13%. The acquisition of Kohinoor led to a strong growth of 32%, while the King's brand experienced 7% growth. The consolidated EBITDA for Q3 stood at INR 637 crores, with a last 12-month EBITDA approaching INR 2,200 crores, reflecting consistent performance above INR 600 crores quarter-on-quarter.

Management emphasized a target EBITDA per ton of INR 3,500 to INR 3,600, stressing effective risk management, and indicated that food business margins may stabilize between 5% to 7% in 2-3 years. They noted that the alternate distribution channel is growing rapidly, with revenue reaching approximately INR 4,800 crores from this segment alone.

Forward-looking points include:

1. The focus on expanding the distribution network, aiming to reach 950,000 outlets across the country.
2. Strong demand recovery anticipated in the Food & FMCG segment, with particular emphasis on accelerating growth in non-Basmati rice and Chakki Atta.
3. The commitment to innovation, with multiple new products launched, including the Fortune Multi Grain Atta, with positive feedback already noted.

Management expressed optimistically about stable pricing for wheat and rice and highlighted the continued growth potential in various food products, anticipating double-digit growth in the Food segment and stable single-digit growth in Edible Oils going forward.

Questions and Answers from the Earnings Call Transcript

1. Question: "Sir, your guidance regarding -- you had guided for INR3,500 crores to INR3,600 EBITDA per ton as sustainable. So now in a stressed commodity cycle, what are the biggest levers that you can use to protect these numbers?"

   Answer: Our guidance of INR3,500 to INR3,600 is based on effective risk management. We've maintained this estimate despite market volatility. By ensuring our positions aren't speculative, we believe we can sustain these margins even during bearish trends.

2. Question: "Sir, in food business, we have become now EBITDA positive. So what margin band should we expect when the scale and when this business grows meaningfully?"

   Answer: We expect this business to remain in an investment phase for the next 2-3 years before seeing meaningful EBITDA margins. Competition suggests that we can target EBITDA margins of 5%-7%, aligning with industry standards.

3. Question: "Sir, regarding G.D. Foods. As we have done 54% material margin, how much of these margins advantage can we retain as volume scale using AWL distribution channel?"

   Answer: We aim to maintain the current margins gained during our acquisition of G.D. Foods. While scaling, we're focused on leveraging AWL's distribution without aggressive pricing, so we believe we can retain these robust margin levels.

4. Question: "On the soya, palm, sun kind of pricing situation. How are you thinking about the macro context on the Edible Oil prices?"

   Answer: We're seeing a balanced growth across all oil categories. While sunflower oil prices are tightening, palm and soybean oils remain stable. Hence, we anticipate continued volume growth driven by our diverse product offerings and expanded distribution.

5. Question: "You mentioned about the smaller grammages market moving to 750 grams. Why the movement downwards? Is it a price thing or affordability driving the change?"

   Answer: Prices of edible oils have risen significantly, prompting brands to reduce packaging sizes to lower prices for consumers. This strategy, particularly prevalent in soybean and palm oils, creates affordability amid inflation pressures.

6. Question: "What is your outlook on the prices for wheat and rice, given that the new crop is likely to come in soon?"

   Answer: We expect stable prices for both wheat and rice. This year's production appears robust due to favorable weather conditions, allowing us to anticipate affordable pricing and enhanced consumer sentiment moving forward.

7. Question: "What's the status on soya oil imports from Nepal, which was impacting our business?"

   Answer: Soya oil imports from Nepal have decreased by 30-40%. Our strong market share in soybean oil has returned as competitive pricing for palm olein has improved. This recovery aligns with our market performance improvements.

8. Question: "Sir, where are we with our aspiration of INR10,000 crores for FY '27. Any delay expected in achieving that target?"

   Answer: While achieving INR10,000 crores in FY '27 is ambitious and may extend to FY '28, we are very close, aided by G.D. Foods and other initiatives that support this goal. However, FY '26's stagnation was an exception.

9. Question: "How much has NPD contributed to the overall growth of FMCG and Foods in our portfolio?"

   Answer: NPD contributes approximately INR500 crores to our portfolio. While it forms a smaller percentage of our staple business, new products have shown higher margins, indicating significant potential as brand awareness grows.

10. Question: "Can you comment on the demand environment across different regions and what you expect for FY '27?"

    Answer: Post the dull first half, we're seeing growth in demand since October, particularly in Tier 2 and Tier 3 cities. We anticipate continued strength in consumption, estimating single-digit growth in Edible Oils and double-digit growth in Food categories.