Overview of Wilmar International

Wilmar International is a global agribusiness company that operates across the entire agricultural commodity value chain. From origination to processing, merchandising, and manufacturing, Wilmar’s diverse operations include branded consumer products and industrial goods. The company’s operations are categorized under food products, feed and industrial products, and plantation and sugar milling segments.

As of February 2025, the stock is priced at S\$3.26 with a target price of S\$3.18, indicating a -2.5% downside. The company is classified under the Consumer Staples GICS sector and has a market capitalization of S\$20.35 billion. Major shareholders include Archer Daniels Midland (22.3%), Kuok Brothers (18.8%), and Kuok Khoon Hong (12.8%).

Key Financial Highlights and Performance

4Q24 Results Preview

Wilmar is set to release its 2H24 financial results on February 20, 2025. Analysts anticipate a core net profit ranging from US\$330 million to US\$340 million for 4Q24, marking a recovery from 3Q24’s US\$208 million but a decline compared to 4Q23’s US\$424 million. Full-year 2024 core net profit is estimated at US\$1.14 billion to US\$1.15 billion, which is 3-4% below UOB Kay Hian’s forecast and 9-10% below consensus expectations.

Despite higher crude palm oil (CPO) prices and improved processing margins, challenges in China’s operations and weaker performance in the sugar division due to harvest delays are expected to weigh down results.

Segment Analysis

Food Products

The food products segment is expected to deliver flat quarter-on-quarter (qoq) performance. While the Chinese government has implemented stimulus measures, household spending remains subdued. Increased year-on-year (yoy) HoReCa (Hotels, Restaurants, and Cafes) spending is driving higher sales volumes in lower-margin medium and bulk packs, partially offsetting the positive impact of low material costs on margins.

Feed and Industrial Products

The feed and industrial products segment is projected to benefit from improved palm refining margins both yoy and qoq. The Malaysian and Indonesian governments’ export levy hikes in November 2024 widened the margin gap. Additionally, soybean crushing margins have improved qoq due to higher soybean meal demand in anticipation of tariff threats but remain lower yoy due to a high base in 4Q23.

Sugar processing, however, is likely to face headwinds from lower volumes and a narrowing white sugar premium, negatively impacting earnings.

Plantation & Sugar Milling

The plantation segment is poised for a qoq recovery, driven by higher palm kernel prices and reduced fertilizer costs. However, the sugar milling division is expected to report lower profits due to delays in sugarcane harvesting in Australia caused by high rainfall.

AWL Acquisition and Strategic Developments

AWL to Become a Subsidiary

Wilmar recently reached an agreement to acquire up to 31.06% of Adani Wilmar Limited (AWL) from Adani Commodities LLP (ACL). This transaction followed ACL’s sale of a 13.51% stake to meet Indian securities regulations requiring 25% public ownership within three years of listing. Wilmar plans to exercise its option to acquire 30.43% of AWL at a maximum price of Rs305 per share over the next 12 months, increasing its stake to 74.37% and making AWL a wholly owned subsidiary.

This acquisition is expected to significantly enhance Wilmar’s profitability starting from 2026. Meanwhile, the company is actively seeking strategic investors for AWL to strengthen its position in the Indian market and explore new distribution channels.

Frequent Share Buybacks

In 4Q24, Wilmar’s chairman and CEO Kuok Khoon Hong demonstrated confidence in the company by repurchasing 8.8 million shares at prices ranging from S\$2.99 to S\$3.10 per share.

Valuation and Recommendation

UOB Kay Hian maintains a “Hold” recommendation on Wilmar with a revised target price of S\$3.18 (up from S\$3.00). This adjustment reflects an increase in the price-to-earnings (PE) peg for its food ingredients business from 16x to 17x, in anticipation of modest consumer sentiment improvements in China for 2025. The PE peg for feed and industrial products, as well as plantations and sugar mills, remains at 11x.

The revised target price translates to a blended 2025F PE of 9.8x. Although the upcoming 4Q24 results are expected to be weaker than anticipated, this may present an opportunity for investors to accumulate shares. The stock also offers a decent dividend yield of 5%, making it attractive for income-focused investors.

Key Catalysts

• China’s Recovery: A significant recovery in China’s consumer spending could positively impact Wilmar’s earnings and market sentiment.
• Strategic Investors: New investors in AWL could enhance its distribution capabilities and strengthen its market position in India.

Financial Projections

The company’s financial projections for 2025F and 2026F indicate a steady recovery:

• 2025F Net Profit: US\$1.58 billion (up 32.8% yoy).
• 2026F Net Profit: US\$1.86 billion (up 18.1% yoy).
• Dividend Yield: 4.7% in 2025F and 5.5% in 2026F.
• Net Debt to Equity: 127.6% in 2025F, expected to decline to 123.5% in 2026F.