Wilmar International

Price targets:

RHB Bank Singapore “buy” $4.40 CGS-CIMB Research “add” $4.63 UOB Kay Hian “buy” $5.50

Analysts trim their target prices on Wilmar following 1QFY2023 earnings

RHB Bank Singapore has maintained its “buy” call on Wilmar International as it believes the stock remains “undervalued”. Along with a slightly reduced earnings assumption, RHB has trimmed the target price from $4.65 to $4.40.

The agri-food giant’s recent 1QFY2023 ended March earnings came in at just 20% of RHB’s earnings projected for the current FY2023 because of lower palm oil prices and processing margins. A slower-than-expected pick-up in demand in China, despite the end of lockdowns, contributed to the missed expectations too.

RHB expects the current 2QFY2023 to be better in terms of sales volumes for food products and crushing, while margins could strengthen in the second half of the year.

RHB points out that the combined value of Wilmar’s China-listed subsidiary Yihai Kerry plus India-based joint venture, Adani Wilmar, is almost double that of Wilmar’s own market cap.

CGS-CIMB Research analysts, in their May 3 note, have similarly cut their target price from $4.82 to $4.63, while keeping their “add” call. CGS-CIMB’s Tay Wee Kuang and Lim Siew Khee have cut their earnings estimate for the current and coming FY2023 and FY2024 by 9.7% and 5.1% respectively, citing margin pressure on plantations and the feed and industrial segment. In addition, they have also taken into account the slower-than-expected recovery in China’s economy.

Their revised target price implies FY2024 earnings estimate of 11.7x slightly lower than its 10-year historical average of 12.2x.

UOB Kay Hian has offered a somewhat somewhat different take from the other brokerages. It has maintained its “buy” call and $5.50 target price on the stock after leaving the 1QFY2023 result briefing with a few “positive surprises” with the management “more upbeat than our expectation”.

Citing the guidance provided by Wilmar’s management, UOB Kay Hian believes that the current 2QFY2023 may turn out to be another “exceptional quarter” where core earnings will at least match the US$382 million ($509 million) reported for the preceding 1QFY2023.

UOB Kay Hian, in its May 3 note, has kept its earnings forecast for the current FY2023 to FY2025 at US$1.9 billion, US$2.2 billion and US$2.4 billion respectively.—