Wilmar’s 3Q23 results came in well within our expectations, but lower than the market’s forecast. The q-o-q improvement was mainly due to:
higher sales volume of the feed & industrial products segment, and
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However, the y-o-y decline in earnings was mainly due to the normalisation of tropical oil refining margins in 3Q23.
Maintain HOLD on Wilmar with a target price of S$3.80.
Wilmar's 3Q23 results within expectations
Wilmar International (SGX:F34) reported 3Q23 core net profit of US$324m (+85% q-o-q, -59% y-o-y), accounting for 79% of our full-year forecast. This is within our expectation, but lower than market’s forecast.
3Q23 earnings higher q-o-q.
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3Q23 and 9M23 earnings declined y-o-y
3Q23 and 9M23 earnings declined y-o-y largely due to the weaker performance from the tropical oils and fertilisers subsegments.
Recall that Wilmar achieved record-breaking earnings in 3Q22, primarily due to significant contribution from the tropical oils sub-segment. This exceptional performance was driven by a record-high processing margin, which was the result of crude palm product prices decreasing more than refined palm products. This drop in prices was influenced by Indonesia's palm oil policies.
Since 1Q23, palm downstream processing margins have returned to normal. We thus expect tropical oil refining margins to normalise and lead to weaker performance in 3Q23-4Q23.
Wilmar's results highlights
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Above is an excerpt from a report by UOB Kay Hian Research. Clients of UOB Kay Hian may be the first to access the full PDF report @ https://www.utrade.com.sg/.
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