Wilmar International: Analysis and Projections

Broker Name: CGS International

Date of Report: November 4, 2024

Overview

Wilmar International has shown mixed performance in the first nine months of 2024, with a core net profit of US\$814.4 million, which missed expectations. This report dives deep into the performance of Wilmar and its peers, providing a comprehensive analysis of the current state and future projections.

Wilmar International

Wilmar International reported a 3Q24 revenue of US\$17.7 billion, reflecting a slight increase of 0.4% year-on-year. Despite higher sales volumes across most sub-segments, profitability was affected due to weaker performance from its China operations and the sugar division. The 3Q24 core net profit saw a 35.7% year-on-year decline, resulting in US\$208.1 million.

Financials for the first nine months of 2024 showed a core net profit of US\$814.4 million, which is 64.1% of CGS International’s forecast for FY24F, suggesting a shortfall. Key reasons for the decline include subdued soybean crush margins in China and weaker sugar prices.

Despite these challenges, Wilmar anticipates better performance in FY25F, driven by improvements in palm production and tropical oil refining margins. The company also expects positive soybean crush margins in China for the near term. The rollout of the B40 biodiesel mandate in Indonesia is expected to benefit Wilmar, given its position as the largest biodiesel producer by volume in Indonesia.

Valuation and Target Price

CGS International has reiterated an Add rating for Wilmar but lowered the target price to S\$3.47, rolling forward the valuation to FY26F P/E of 11x. The potential stake sale of Adani-Wilmar could also result in one-off gains translating to a special dividend, acting as a rerating catalyst.

Peer Comparisons

Golden Agri-Resources Ltd (GGR SP)

Golden Agri-Resources is not rated by CGS International but has a market cap of US\$2,564 million. The company shows a favorable price-to-earnings ratio of 6.5x for CY24F, indicating potential undervaluation. The dividend yield stands at 2.0% for CY24F and 4.0% for CY25F, suggesting a relatively stable income stream for investors.

First Resources Ltd (FR SP)

With a market cap of US\$1,647 million, First Resources is also not rated by CGS International. The company’s price-to-earnings ratio is projected to be 7.8x for CY24F and 8.0x for CY25F, showing moderate valuation. First Resources maintains a robust dividend yield of 6.0% for CY24F and 6.5% for CY25F.

Bunge Global SA (BG US)

Bunge Global, with a market cap of US\$14,546 million, is not rated by CGS International. The company’s price-to-earnings ratio stands at 10.9x for CY24F and 10.4x for CY25F. Bunge Global offers a dividend yield of 2.6% for both CY24F and CY25F, providing a steady income stream for investors.

Archer-Daniels-Midland Co (ADM US)

Archer-Daniels-Midland, with a market cap of US\$30,156 million, is not rated by CGS International. The company’s price-to-earnings ratio is projected to be 10.8x for CY24F and 10.6x for CY25F. The dividend yield is 3.3% for CY24F and 3.5% for CY25F, making it an attractive option for income-focused investors.

IOI Corp Bhd (IOI MK)

IOI Corp, rated as Reduce, has a market cap of US\$5,438 million. The company’s price-to-earnings ratio is higher at 18.5x for CY24F and 17.3x for CY25F. The dividend yield stands at 2.7% for CY24F and 2.9% for CY25F, offering moderate returns to investors.

Genting Plantations Bhd (GENP MK)

Genting Plantations, rated as Hold, has a market cap of US\$1,083 million. The company’s price-to-earnings ratio is 15.9x for CY24F and 16.1x for CY25F. Genting Plantations offers a dividend yield of 3.8% for CY24F and 3.7% for CY25F, providing a stable income stream for investors.

Kuala Lumpur Kepong Bhd (KLK MK)

Kuala Lumpur Kepong, rated as Hold, has a market cap of US\$5,456 million. The company’s price-to-earnings ratio stands at 20.3x for CY24F and 17.5x for CY25F. The dividend yield is 2.9% for CY24F and 3.4% for CY25F, offering moderate returns to investors.

SD Guthrie Bhd (SDG MK)

SD Guthrie, rated as Add, has a market cap of US\$7,814 million. The company’s price-to-earnings ratio is 24.2x for CY24F and 22.4x for CY25F. The dividend yield stands at 2.5% for CY24F and 2.7% for CY25F, providing moderate income to investors.

Conclusion

Wilmar International, despite facing challenges in 2024, is poised for improvement in FY25F, driven by better macro tailwinds and strategic initiatives. The analysis of its peers provides a comprehensive view of the agribusiness sector, highlighting various investment opportunities based on valuation and dividend yields.

Investors should consider both the potential risks and rewards when making investment decisions in this sector.