Analysts from RHB Group Research and UOB Kay Hian are expecting Wilmar International to log record earnings for the FY2021 ending December after the group reported strong earnings for the 3QFY2021 ended September.
On Oct 29, Wilmar International posted earnings of US$568.7 million ($767.5 million), up 6% y-o-y. The agri-giant also reported revenue of US$17.1 billion, up 28.7% y-o-y.
For the 9MFY2021, Wilmar’s earnings surged 15.1% y-o-y to US$1.3 billion.
In their reports dated Nov 2, RHB and UOB Kay Hian have kept “buy” on the counter.
See: UOB Kay Hian expects Wilmar to report core net profit of at least US$450 mil ahead of 3QFY21 results
The Singapore research team at RHB has upped its target price estimate on Wilmar to $5.60 from $4.50
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“With improving economic activity in China and the still-high commodity prices, 4QFY2021 should be another strong quarter. Wilmar remains severely undervalued – it is trading at 12 times FY2022 price-to-earnings (P/E),” writes the team.
To the RHB team, Wilmar’s 9MFY2021 PATMI surpassed expectations, at 78% to 81% of their estimates for the FY2021.
On this, the team has raised its net profit estimates by 1% to 9% for the FY2021 to FY2023.
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This comes after upping its sales volume assumptions for the consumer pack and margins for the feed and industrial segment, as well as for the plantation and sugar milling division.
“As Wilmar’s China operations account for a hefty 90% of earnings, its valuation remains very inexpensive (trading at 12.3 times FY2022F P/E vs China-listed peers’ 32-37 times),” writes the team.
At UOB Kay Hian, analysts Leow Huey Chuen and Jacquelyn Yow Hui Li also deem Wilmar as being on track to deliver a record net core profit for the FY2021 since its listing.
However, Leow and Yow have lowered their target price estimate to $6 from $6.40 after pegging a lower P/E valuation for its China operations and rolling their valuation for Wilmar to FY2022 earnings per share (EPS).
To them, Wilmar’s operations in China are expected to remain challenging and to deliver weaker margins at least into FY2022, compared to its previous performance.
“We maintained a blended 11 times P/E for non-China operations. We like Wilmar for its diversified and integrated business model which has delivered good results performance despite the global uncertainty in 2020 and 2021 amid the Covid-19 pandemic,” they write.
Despite the lower target price estimate, the analysts at UOB Kay Hian have upped their FY2021 earnings forecast by 3% to US$1.71 billion from US$1.66 billion.
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They have also kept their earnings estimates for FY2022 and FY2023 with core net profits of US$1.79 billion and US$1.96 billion respectively.
“FY2021 earnings were also fine-tuned to factor in higher margins from palm and sugar operations while we trimmed the contributions from consumer packs and oilseeds & grains,” they write.
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The way they see it, Wilmar’s central kitchens would be the next earnings booster for its subsidiary Yihai Kerry Arawana (YKA).
“Under this central kitchen model, it will operate as a centre of food processing operators, who will rent the space from YKA. Besides renting the space to these operators, YKA will also act as a one-stop centre to supply ingredients and gather other ingredient suppliers to ensure low operating cost and high efficiency,” say Leow and Yow.
“The first central kitchen to start operation is in Hangzhou and it will provide students’ meals, seasoning packets and cooked food to F&B outlets. The central kitchen would be able to break even in its first year of operation but contribution is still very marginal.”
Shares in Wilmar closed 2 cents lower or 0.45% down at $4.43 on Nov 8, or an FY2021 P/B of 1.1 times and dividend yield of 3.3%, according to UOB Kay Hian’s estimates.
