Wilmar International - UOB Kay Hian 2021-11-02: On Track For A Record Profit Year


Wilmar International - On Track For A Record Profit Year

  • We remain positive on Wilmar International post-briefing. Wilmar International is well on track to deliver a record net core profit for 2021 since its listing. Palm and sugar businesses will do well as margins remain good in 4Q21. China operations are showing improvement but remain challenging.
  • Lower target price after rolling over to 2022F EPS and lower P/E valuation for its China operation. Maintain BUY rating on Wilmar International.

Wilmar's good earnings momentum likely to continue into 4Q21.

  • Refer to Wilmar International 3Q21 - UOB Kay Hian 2021-11-01: Record Quarterly Profit; Above Expectation for results note. Post-briefing, we remain positive on Wilmar International (SGX:F34). 4Q21 is expected to be another good quarter and earnings are likely to be better y-o-y and lead to record profit for Wilmar International in 2021. Due to Wilmar International’s strong 3Q21 performance, we have adjusted our 2021 earnings forecast by 3% to US$1.71b from US$1.66b.
  • High commodity prices and good refining margin for tropical oils and sugar segments. The record high CPO price and strong sugar price continue to benefit the plantation upstream and sugar segment. Getting the market rights at such a volatile time is key to maintain high downstream processing margins. For 4Q21, palm and sugar processing margins will remain high while sales volume may be lower as compared to 3Q21 as palm is entering low production season and it is the end of the Australia sugar-milling season.

China operation remains challenging but improving.

  • During Yihai Kerry Arawana’s (YKA) briefing, it was reiterated that operations are still challenging but improving compared to 9M21:
    1. Soybean crushing margins and volume are improving. The soybean crushing margins and volume are YKA has not been able to increase its selling price much to pass on the high raw material cost

Stock Impact

  • No impact from China power shortage. There is no cost and increase internal efficiency before passing down the cost to the end-customers. On top of that, the price adjustments are carried out in a few stages and hence the impact from the current record high raw material cost would not be immediately reflected.

Reiterate BUY on Wilmar International with a lower target price

Leow Huay Chuen UOB Kay Hian Research | Jacquelyn Yow Hui Li UOB Kay Hian | https://research.uobkayhian.com/ 2021-11-02
SGX Stock Analyst Report BUY MAINTAIN BUY 6.00 DOWN 6.400