February 22, 2024

2023: Results Above Expectation

Wilmar’s 2H23 results came in above expectations, largely driven by strong sales volume in China and firm sugar pricing. Although we expect earnings improvement for 2024 on better sales volume and margin improvement from China operations, share price performance may remain lacklustre due to Wilmar’s association with the recent China palm oil fraud. Despite a lower net profit recorded for 2023, the total dividend declared remains at S$0.17 per share. Maintain HOLD with a target price of S$3.35.


• Above expectations. Wilmar International (Wilmar) reported 2H23 core net profit of US$748m (+34% qoq, -41% yoy) after excluding a disposal gain of associates at US$241.3m, bringing 2023 core net profit to US$1.33b (-41% yoy). This is above our and consensus expectations.

• The key variance mainly came from: a) Oilseeds & grains segment: Higher sugar merchandising volume and better margin from soybean crushing. b) Plantation & sugar milling segment: Higher-than-expected sugar sales volume.

• Wilmar declared a final dividend of S$0.11/share for 2H23 and total dividend of S$0.17/share for 2023 (5% yield). The total dividend declared was the same as 2022’s.

• Note that Wilmar’s overall performance improved hoh, with stronger operating margin registered especially from its China operation as well as benefitting from the good raw sugar pricing. Some other key highlights from Wilmar’s 2H23 results are:

a) Strong sugar milling: Earnings increased hoh and yoy on the back of firm sugar prices and higher sales volume.

b) Food products: Earnings improved hoh and yoy with higher sales volume for its medium pack and bulk products (especially flour and rice sales).

c) Feed and industrial products: Earnings increased hoh with oilseeds division recording higher crushing margin and higher sugar merchandising volume.

• YKA results snapshot. Yihai Kerry Arawana (YKA) is Wilmar’s subsidiary, and usually contributes 60-70% of Wilmar’s net profit. YKA reported a strong turnaround in the 2H23, with net profit doubling from Rmb965.7m in 1H23 to Rmb1,882.0m. In 2023, YKA reported a net profit of Rmb2,847.7m compared to Rmb3,011m (-5.4% yoy), primarily supported by the recovery in sales volume. The strong performance in 2H23 was attributed to a better contribution from soybean crushing, particularly during 3Q23 when domestic soybean supply was tight. This resulted in higher prices for products like soybean meal and a significant increase in crushing profits. However, the flour business did not perform well in 2023, affected by the high-priced wheat inventory in 1H23 and weakened demand in 2H23.


• Management outlook guidance: a) Expect the tough operating conditions to continue into 2024. b) Tropical oils margins are expected to remain depressed, sugar milling margins will be affected by lower sugar prices and operating conditions in China are expected to remain challenging. c) In 2024, Wilmar will continue to focus on improving efficiencies of its operations, reducing capital expenditure and extracting benefits from the past expansion especially those that started operations in the last few years.


 Maintain earnings forecasts. We maintain our 2024-25 earnings forecasts at US$1.56b and US$1.95b respectively, while pending more information from the upcoming analyst briefing on 22 Feb 24.


• Maintain HOLD with a target price of S$3.35. Our valuation is based on 2024F EPS and uses the SOTP valuation by pegging PE of 18x, 10x and 11x for food products, feeds & industrial products and plantations & sugar mills respectively.


• Greater recovery in China. As YKA is still the largest profit contributor to Wilmar, a surprise recovery would be positive to earnings and market sentiment towards Wilmar’s performance. • If Wilmar is definitively cleared from any association with the recent China palm oil fraud, we anticipate a favourable trajectory for the company’s share price. Such a resolution would likely mitigate apprehensions, contributing to a restoration of investor confidence in the company’s corporate governance.


Wilmar’s business encompassing the entire value chain of the agricultural commodity business, from origination, processing, merchandising to manufacturing of a wide range of branded consumer products.

HOLD by UOB Kay Hian Research. Share price closed at S$3.41