Wilmar International - Maybank Kim Eng 2021-08-13: Better Days Ahead?

WILMAR INTERNATIONAL LIMITED (SGX:F34) | SGinvestors.io WILMAR INTERNATIONAL LIMITED (SGX:F34)

Wilmar International - Better Days Ahead?


Sequential operating improvements underway

  • Wilmar International (SGX:F34)’s 1H21 was in-line with Street/MKE expectations. Higher commodity prices were a double-edge sword. These supported strong performance in upstream plantations and downstream refining. These segments should remain supported in 2H21, we believe.
  • On the other hand, consumer margins saw pressure from higher input costs. Weakness here as well as soybean crushing should ease in 2H21 from better ASPs, we believe.
  • Wilmar's share price has de-rated 10% since May and is at a 44% discount to its peer group. Potential value unlocking and improving margin outlook should be positive catalysts going forward. BUY.


Food Products tight margins

  • Consumer Product volumes fell 30% y-o-y from a high base effect from last year’s pandemic lockdowns in China where customers rushed to stock-up for in-home dining. As more are choosing to dine-out, Medium Pack volumes (74% of segment vols) are increasing (+25% y-o-y). Delta-variant risks notwithstanding, wider re-opening should be supportive of overall volumes, we believe.
  • Nevertheless, 1H21 PBT/ton margins fell 20% y-o-y as higher commodity input costs began to bite. Wilmar International's management claims they are raising ASPs and these should flow through in 2H21, we believe the full pass-through of costs are unlikely given these are food staples.
  • We have lowered 2021-23E segment PBT/ton assumption by 5% each.


Upstream bright sport and crushing margin upside

  • 1H21 Plantations PBT/ton saw a strong rebound from losses year ago largely driven by higher CPO prices. Supply-demand metrics point to sustained price support in the near term. Feed & Industrial segment PBT/ton also saw a 30% y-o-y increase from supportive palm oil refining margins.
  • Oilseed crushing saw lower volumes (-11% y-o-y) from weak downstream demand due to a glut in pork availability. Management claims this is improving in 3Q21.


Staying on strategy. Maintain BUY






Thilan Wickramasinghe Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-08-13
SGX Stock Analyst Report BUY MAINTAIN BUY 6.03 DOWN 6.210



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