WILMAR INTERNATIONAL LIMITED (SGX:F34)
Wilmar International 1H21 Results Preview - Expect Profit To Grow Marginally Y-o-y
- Wilmar International is scheduled to report 1H21 results on 11 Aug 21.
- Wilmar International reported 1Q21 core net profit of US$424m, and we are expecting a core net profit of US$250m-270m for 2Q21 to bring 1H21 core net profit to US$675m-695m vs 1H20’s US$636m. There is a weaker crushing margin and only 90% of YKA contribution this year.
- Maintain BUY. Target price: S$6.40.
Expect Wilmar to report marginal y-o-y growth for 1H21.
- Wilmar International (SGX:F34) is scheduled to release its 1H21 results on 11 Aug 21 after the market closes. We are expecting 1H21 core net profit to be within US$675m-695m vs 1H20’s US$636m.
- Wilmar International reported 1Q21 core net profit of US$424m; thus, 2Q21’s core net profit is expected to come within US$250m-270m (vs 2Q20’s US$329m). Weak 2Q is a norm as this is the season with low crushing activities, slower consumer packs sales and the off-season for sugar milling. To recap, 2Q20 had an unusually high profit due to the pent-up demand in China after the lockdown in 1Q20.
1Q21 was a good quarter.
- Wilmar International reported a 1Q21 core net profit of the plantation and sugar milling segments.
2Q21 could be weaker y-o-y.
- Besides the lower contributions from Yihai Kerry Arawana (YKA), the largest earnings contributor to Wilmar International’s earnings (~60-65% of PBT) post listing on 12 Oct 20, its contributions in 2Q21 were also affected by:
- Weak soybean crushing margins. Soybean crushing margins in China dropped significantly post Chinese New Year due to weaker demand for animal feeds as hog price dropped. Soybean meal mix in animal feeds was also lower as wheat meal replaced corn meal. This segment will still report a profit which is largely from the hedging profit, whereby bulk of the profit was booked in 1Q21.
- Consumer packs’ margins may be lower due to high feedstock prices. The consumer packs market is very competitive and this will limit the ability to increase the selling prices despite high feedstock costs. Thus, we are also expecting lower margins y-o-y from this segment.
Tropical oils division likely to maintain steady performance.
- Contributions are likely to be better y-o-y driven by higher sharp inverse forwards curve.
Sugar merchandising still performing well as white sugar premium remains favourable.
- Effective this year, Wilmar International is capitalising the 1H mill maintenance cost and its best-ever results in this financial year.
Earnings Forecast
- We maintain our earnings forecast for 2021/22/23 with core net profits of US$1.66b, US$1.78b and model, economies of scale and proximity to feedstocks/end markets.
VALUATION/RECOMMENDATION
- Maintain BUY call on Wilmar International with a target price of S$6.40 based on 2021F EPS, reflecting a blended 26x 2021F P/E for China operations and blended 11x for non-China operations.
- See
- We reckon there are no strong near-term catalysts to support the share price performance post YKA listing and the exceptionally good earnings in 2020.
- We remain positive on Wilmar International given:
- its integrated business model, and
- its business focus on consumer staples will allow it to continue to deliver steady earnings despite a challenging operating environment amid the COVID-19 pandemic.
SHARE PRICE CATALYST
- Potential listing of its subsidiaries/JVs. The next entity earmarked for listing would be Adani Wilmar which is Wilmar International’s 50% JV company in India. Adani Wilmar Ltd (AWL) is the largest edible M&A.
Leow Huay Chuen
UOB Kay Hian Research
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Jacquelyn Yow Hui Li
UOB Kay Hian
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https://research.uobkayhian.com/
2021-07-22
SGX Stock
Analyst Report
6.400
SAME
6.400
