WILMAR INTERNATIONAL LIMITED (SGX:F34)
Wilmar International - Common Prosperity Winner?
Catalysts lining up for re-rating
- Wilmar's share price has de-rated 21% from its peak this year on concerns of weak crush margins, and higher raw material costs. There are clear signs of turnaround in 3Q21, which should set the Group up to deliver in 2022E.
- Structurally, Wilmar International should be a beneficiary of China’s common prosperity drive, while regional re-opening could boost volumes. Potential restructuring, special dividends and share buybacks are catalysts going forward.
- Maintain BUY rating on Wilmar International.
Recovery gathering pace post 2Q21
- Following a squeeze in 2Q21, margins and volumes are on the mend. This trend should accelerate in 4Q21 and 2022E, according to Management. ASPs are increasing to reflect higher raw material costs, while crush margins have turned positive. Higher palm oil and sugar prices should be supportive of upstream contribution.
- Shaky Chinese industrial output is unlikely to affect food-staples volumes, in our view. In fact, Management expects volume acceleration in 4Q21 as CNY re-stocking begins.
- We have raised Food Product segment PBT/ton margins by 8-10% for 2021-23E.
Diversified, common prosperity winner?
- According to Management, the current Chinese power India should provide a boost to volumes, in our view.
Maintain BUY with slightly lower target price
- Wilmar International’s Chinese listing – YKA (300999 SH) - trades at buybacks are on the upside.
- We roll forward our blended DCF (WACC 5.5%, 1% terminal) and peer P/E (target P/E of 21x) valuation. Our target levels offer significant value to play the EM consumption theme.
- See
Thilan Wickramasinghe
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2021-11-01
SGX Stock
Analyst Report
5.80
DOWN
6.030
