Despite headwinds from weaker consumer sentiment, the prolonged zero-Covid policy in China and lower crude palm oil (CPO) prices, Wilmar’s 3Q22 results beat expectations. Its revenue rose 10.2% year-on-year (YoY) to USD18.9b while net profit was up 34.7% YoY to USD766.2m. Consumer products business in China improved in 3Q22, benefiting from lower raw material costs and higher selling prices as Wilmar made upward price adjustments in the earlier quarters amid cost pressure. Management guided for better crushing margins in 4Q22 given higher hog prices in China, potentially supporting for better performance for Yihai Kerry Arawana (YKA). We lower our fair value estimate from SGD5.23 to SGD4.68 after applying lower target multiples to our model to reflect a weaker economic growth outlook and lower CPO prices. Wilmar is trading at undemanding valuations. We remain positive on Wilmar’s earnings prospects given its strong market share, well distributed nationwide plants and integrated business model which will provide operational synergies and cost efficiencies.
While results are good, the market is sluggish at the moment due to the rate hikes and recessionary risks. I would be careful at the moment in entering the market. At the moment I am dollar cost averaging . While I have made losses, I am buying this for the long haul. This should see an uptick end next year.
DYODD
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
K