WILMAR INTERNATIONAL LIMITED (SGX:F34)
Wilmar International - India To Restrict Sugar Exports; Still BUY
- India’s plan to restrict its sugar exports should not have a significant impact on Wilmar (SGX:F34) as it mostly sells its sugar domestically. However, if this is extended into the next marketing year which starts in October, there could be a slight negative impact.
- Maintain BUY call on Wilmar and S$5.10 target price, 24% upside with ~3% FY22F yield.
India plans to restrict sugar exports for the first time in six years
- India plans to restrict sugar exports for the first time in six years to prevent a surge in domestic prices, potentially capping this season's exports at 10m tonnes, according to media reports.
- India is the world's biggest sugar producer and the second biggest exporter behind Brazil. Heat waves have withered fields in India, prompting a government order dated 13 May to restrict shipments and safeguard domestic supply. It is making exceptions on export restrictions only for prior commitments made by private traders through irrevocable letters of credit, and for exports to countries that require wheat for food security needs, based on the requests of their governments.
Exports of 7.1m tonnes already completed for this marketing year.
- The Indian Sugar Mills Association projects sugar output at 35.5m tonnes this marketing year, with Indian mills having so far signed contracts to export 8.5m tonnes of sugar. Out of the contracted 8.5m tonnes, mills have already despatched around 7.1m tonnes.
We believe the limit of 10m tonnes could actually be enough for India
- We believe the limit of 10m tonnes could actually be enough for 3m tonnes.
Wilmar owns the majority stake in Shree Renuka Sugars (SRSL)
- In India, Wilmar owns the majority stake in Shree Renuka Sugars (SRSL), which has seven mills with a total cane crushing capacity of 8.4m tonnes pa, and two port-based refineries with a combined capacity of 1.8m tonnes, selling sugar under the Madhur brand. It is the largest refiner in India.
- Sugar is captured under two segments in Wilmar’s earnings:
- The feed and industrial product segment, which comprises the sugar trading business (8% of revenue), and
- the palm oil and sugar milling (1.7% of revenue) segment.
- We understand Wilmar mostly sells its sugar domestically and, therefore, should not be significantly affected by this ban.
No changes to our earnings estimates for Wilmar, BUY call and S$5.10 target price.
- We do not expect this restriction to have a target price for Wilmar.
- See
Singapore Research
RHB Securities Research
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https://www.rhbinvest.com.sg/
2022-05-25
SGX Stock
Analyst Report
5.100
SAME
5.100
