Excerpts from CGS-CIMB report

Analyst: Ivy Ng, CFA

WILMAR International
Record high profit and dividend in 1H22

■ Wilmar’s 1HFY22 CNP above, on higher plantation and sugar milling earnings.

Wilmar

Share price: 
S$4.13

Target: 
S$5.69

■ Plantation segment posted record 1HFY22 earnings, as higher CPO price more than offset impact from Indonesia export ban.

■ Wilmar could beat our and consensus’ forecasts and post another record earnings year in FY22F. Reiterate Add with unchanged TP of S$5.69/share


Wilmar Nodeforest1.21
1HFY22 core net profit rose to new high – beat expectations
Wilmar International posted a 34% yoy rise in its 1H22 core net profit (CNP), excluding gains from non-operating items of US$12.6m and gain from the dilution of interest in Adani Wilmar Ltd, AWL, worth US$175.6m) to US$980m, due to better performances from all divisions except food products.

An interim dividend per share of S$0.06 was declared in 1H22 (vs. S$0.05 in 1H21), representing a dividend payout ratio of 24%, the highest interim dividend since listing.

We consider the 1H22 CNP as above, as it makes up 55% and 52% of our and consensus’ full-year projections. (Over the past 10 years, 1H CNP had on average made up 33% of the full-year CNP).

2Q22 CNP grew 99% qoq to US$652m due to better performances from all business segments.

An interim DPS of S$0.06 was declared in 1H22 (vs. S$0.05 in 1H21), representing a dividend payout ratio of 24%, the highest interim dividend since listing.

Plantation and sugar milling the main earnings driver in 1H22
The plantation and sugar milling segment was the key earnings driver in 1H22, thanks to higher CPO price and better performances from sugar milling operations in India.

1H22 PBT jumped 2.6x to US$436m and contributed 71% of the earnings improvement in the period. The food products segment posted a 19% yoy decline in pretax profit to US$345m in 1H22 (excluding US$176m gain from AWL) as it was not able to fully pass on the rising raw material costs to customers.

However, this was partly offset by higher sales volume (+4% in 1H22), as demand for consumer products improved following the reimposition of lockdowns in most parts of China.

PBT contribution from its feed and industrial products division grew 5% to US$503m in 1H22, due to recovery of crushing margins and prudent sourcing of feedstocks. However, this was partly offset by lower sugar merchandising margin.

The group said its tropical oils business performed satisfactorily, despite the threeweek export ban on CPO and refined palm oil products as well as multiple changes in palm oil export measures by Indonesia, which led to a 9% yoy drop in sales volumes for tropical oils in 1H22. Wilmar’s joint ventures and associates contribution rose 10% to US$153m in 1H22, due to better results from its investments in Europe and Southeast Asia.

Reiterate Add; low P/E of 10.6x and attractive yield of 4.2%
IvyNg1.14Ivy Ng, CFAThe record 1H22 profit achievement, amid a period of record-high and volatile commodity prices, is another testament to the group’s strong integrated business and diversified business model.

We expect 2H22F earnings to be driven by higher tropical oils sales volumes and better food product margins, though this could be partly offset by weaker
plantation earnings.

We maintain our SOP-based TP of S$5.69 (implied FY22F P/E of 15x) and Add rating, due to its low FY22F P/E valuation of 10.6x and dividend yield of 4.2%.


Key downside risks: inability to pass on rising costs and unfavourable government policies.


Full report here.


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