Wilmar International - OCBC Investment 2021-05-03: A Strong Quarter

WILMAR INTERNATIONAL LIMITED (SGX:F34)

Wilmar International - A Strong Quarter

Wilmar International (SGX:F34)’s 1Q21 revenue rose 30.6% y-o-y to US$14.3b while PATMI jumped 100.9% y-o-y to US$450.2m, due to
1. stronger performances across its key segments;
2. a reversal of mark-to-market losses on hedging derivatives which had been largely completed in 1Q21;
3. good manufacturing margins which benefitted the Feed & Industrial Products segment;
4. strong sugar and CPO prices; and
5. higher contributions from the group’s associates and joint ventures.
Core PATMI rose 38.3% to US$423.7m, making up 27% of our full year forecast, broadly in-line with our expectations.

For Food Products, sales volume rose 13.1% y-o-y, largely driven by higher Medium Pack and Bulk (+19.8% y-o-y) on the back of higher demand from HORECA as China recovered from the lockdowns with more people dining out.
Despite the high base in 1Q20, Consumer Products recorded a growth of 2.8% y-o-y in sales volume due to a shift in consumer preference towards better quality food products.

Separately, sales volume for Feed and Industrial Products rose 1.5% y-o-y, driven by strong sugar merchandising activities, but was partially offset by lower soybean crushing activities during the quarter. Management expects to see lower crush margins in 2Q21 after a few quarters of good performance due to lower soymeal demand in China.
We understand from management that Wilmar is the essential food products provider in India, and they have seen little impact from rising infection rates in India on Wilmar’s operations, except for the HORECA demand.
See
We continue to see Wilmar as a beneficiary of recovery in China, higher CPO and sugar prices, and Indonesia’s B30 program. After adjustments, our fair value estimate for Wilmar increases slightly from S$6.16 to S$6.21.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2021-05-03

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