WILMAR INTERNATIONAL LIMITED (SGX:F34)
Wilmar International - All Set For a Record Year In FY21F; BUY
- Wilmar International’s 9M21 earnings surpassed expectations, with FY21F on track to becoming a record year of earnings for the company.
- With improving economic activity in China and the still-high commodity prices, 4Q21 should be another strong quarter.
- Wilmar International remains severely undervalued – it is trading at 12x 2022F P/E. Maintain BUY, new target price of S$5.60 from S$4.50, 27% upside with ~3% FY21F yield.
Wilmar International's 9M21 above expectations.
- Wilmar International (SGX:F34)’s 9M21 PATMI of US$1.3bn (+15% y-o-y) makes up 78-81% of our and Street FY21F estimates (9M20: 76%). This came mainly from stronger-than-expected sales volumes at its food products segment, as well as better-than-expected margins at its feed and industrial units, despite a decline in sales volumes.
- Food products segment saw an overall 5.6% y-o-y rise in sales volumes, driven by a 15.6% jump in medium pack and bulk products, which came mainly from flour and rice products. This was slightly offset by an 11.8% y-o-y decline in consumer product volumes, due to the impact of COVID-19 on the food and beverage segment in China. Management believes 4Q21 should see better consumer product volumes, on the back of the build-up to the festive season.
- Feed and industrial division recorded improved earnings despite lower volumes. Sales volumes at its feed and industrial division dropped by 7% y-o-y in 9M21, due to weaker soybean crushing and sugar merchandising activities. However, PBT improved y-o-y, as strong refining margins and higher demand from the tropical oils downstream businesses offset the lower soybean crushing volume as well as the higher raw material cost for the oilseed crushing arm.
- Going forward, Wilmar International expects crushing volumes and margins to improve in 4Q21, as pork prices have picked up. In addition, margins for the palm oil refining and oleochemical segments should remain upbeat, given the tax levy advantage over upstream players (currently at US$187.00/tonne) for refiners in October.
- Plantation and sugar milling division continued to contribute to the improved profits on the back of higher palm and sugar prices. Management believes with supply fundamentals expected to improve significantly in 2022, this should result in lower vegetable oil prices. However, much would depend on weather extremities as well as the direction of crude oil prices, which could influence biodiesel demand.
We raise Wilmar's FY21-23F net profit forecast by 1-9%
- We raise Wilmar International's FY21-23F net profit by 1-9%, after increasing our sales volume assumptions for the consumer pack and margins for the feed and industrial segment, as well as for the plantation and sugar milling division.
- See
- BUY, with a new SOP-based S$5.60 target price. As Wilmar International’s China operations account for a hefty ~90% of earnings, its valuation remains very inexpensive (trading at 12.3x 2022F P/E vs China-listed peers’ 32-37x).
Singapore Research
RHB Securities Research
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https://www.rhbinvest.com.sg/
2021-11-02
SGX Stock
Analyst Report
4.50
UP
5.60
