Strong soybean crushing
- Results in line; growth driven by strong soybean crushing.
- Cut EPS by 5-6% on the back of depressed sugar prices.
- Maintain BUY; new TP SGD4.14 from SGD4.04 after rollover.
Results in line
- Wilmar announced a good set of 2Q15 results with net profit up 18% YoY.
- 1H net profit grew by 33% YoY and formed 32% of our full year forecast.
- We consider 1H results in line as the sugar division will only start contributing in 2H.
- Low commodity prices resulted in 12% decrease in both 2Q15 revenue and cost of sales.
- GPM remained comparable at 7.7%.
- Wilmar declared an interim dividend of SGD2.5cts per share, vs last year’s SGD2.0cts.
- Oilseeds & Grains division recorded a strong quarter with PBT up 179% YoY on the back of improving soybean crushing margin and higher volume.
- Downstream consumer products business also performed well.
- Tropical Oils division’s PBT dropped by 15% YoY mainly due to lower CPO prices and weaker refining margins, which were partly offset by higher CPO production yield.
- Sugar division recorded a loss before tax but 1H is always a low season for sugar as cane harvest usually peaks in 2H.
Still top sector pick
- We are encouraged by improving soybean crushing margin, which management expects will remain solid for the rest of the year.
- We expect CPO refining margin to improve slightly in 2H with increased palm production and demand from lower CPO prices.
- However as sugar price remains depressed, we think sugar division will perform worse in 2H15 than in 2H14.
- We lower our net profit forecasts by 5-6% for the next three years on lower sugar division margin assumptions.
- Wilmar remains our top sector pick as we believe its integrated business model provides better earnings stability vs peers.
- We rollover valuation base to FY16 and adjust our TP from SGD4.04 to SGD4.14, still pegged to 15x PE. BUY.
Analyst: Wei Bin
Source: http://www.maybank-ke.com.sg/
