Maybank Kim Eng 2015-08-06: Wilmar International - 2Q15 Result. Strong soybean crushing. Maintain BUY.

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