Wilmar 3Q23 Results Preview - UOB Kay Hian 2023-10-19: Pressure On Palm Refining Margins Intensifies

• We are revising down our earnings estimates for Wilmar again and this is after taking into consideration tough palm refining operations and China’s slower-than-expected recovery.
• In the upcoming 3Q23 results, we are only expecting Wilmar to report a core net profit of US$300m-320m (vs 3Q22’s US$796.7m and 2Q23’s US$195.1m). Note that Wilmar's record-high profit in 3Q23 was due to palm refining margins at the higher-ever level caused by market distortions.

Recovery expected to be weaker and slower.

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Wilmar's 3Q23 earnings likely to be weaker than our initial expectation.

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• Based on key market indicators and trends, we are expecting a core net profit of US$300m-US$320m for 3Q23, which could be its lowest 3Q profit since 2017. Note that 3Q has always been the best quarter for Wilmar due to the festive demand in China and India.
• Our US$300-320m expectation is a significant drop from 3Q22’s US$796.7m. However, this sharp drop should not come as a surprise as back in 3Q22, all palm downstream processors reported their best-ever margins in history due to the market being distorted by the various policies changes in Indonesia.
• We estimate that palm refining margins in 3Q22 ranged between US$100-120/tonne vs 3Q23’s US$5-15/tonne. Palm refining margins normally range between US$10-20/tonne.

YKA’s performance should be better y-o-y and q-o-q

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Leow Huey Chuen UOB Kay Hian Research | Jacquelyn Yow Hui Li UOB Kay Hian | https://research.uobkayhian.com/ 2023-10-19 SGinvestors.io

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