Analysts cut target price for Wilmar amid regulatory overhang, higher raw material costs

[SINGAPORE] Analysts have reduced their target price for Wilmar International, citing regulatory risks arising from the haze-related probe, alongside higher raw material prices caused by El Nino.

CGS International (CGSI) reduced the company’s target price to S$3.15 from S$3.60, while maintaining its “hold” call.

Jacquelyn Yow from CGSI said that the house maintained its position over uncertainty related to Indonesia’s palm oil policies and haze-related enquiries by the National Environmental Agency (NEA).

This comes after the Singapore government began investigating companies linked to the haze, meeting with the senior leadership of Singaporean businesses allegedly linked to haze-related activities on Wednesday (Oct 28).

Kuok Khoon Hong, chairman and CEO of Wilmar, was one of the executives present in the meeting.

On Friday, the government appointed seven investigation and law firms, as well as one individual to a specialist panel assembled to investigate firms linked to the transboundary haze.

Wilmar said in a Thursday evening bourse filing, issued before the list of assessors was unveiled, that it has informed NEA it will engage an investigations firm and a law firm from the panel.

The group on Wednesday announced that it has reversed its loss in the year-ago period, reporting a Q3 profit of US$281 million for the period ended Sep 30.

However, its core net profit declined 22.9 per cent from US$364.6 million in Q3 FY2025, after excluding a one-off compensation expense of US$712.3 million paid to the Indonesian government.

The conglomerate said its food products segment was hit by higher raw material costs, and the feed and industrial products segment, by weaker soybean crushing margins.

Its nine-month earnings for the period ended Sep 30 dropped 3.4 per cent year on year.

The figures missed RHB Group’s full-year forecast. They were also below the estimates of DBS Group Research and CGSI.

RHB maintained its “neutral” call, while cutting its target price to S$3.35 from S$3.85.

DBS Group Research’s target price of S$3.60 and “hold” call remained unchanged, with the research house reviewing its forecast.

Analysts noted that the decline in core net profit was driven by various factors such as higher raw material prices, amid prolonged geopolitical conflicts and El Nino risks.

William Simadiputra, an analyst from DBS Group Research, said: “As we approach year-end 2026, El Nino risks and elevated Brent crude oil prices could keep raw material prices – particularly those across edible oil complexes – high and continue to pressure margins.”

Moreover, dry weather might continue to weigh on production, resulting in lower crop yields, said CGSI’s Yow.

“Lower crop volumes could weigh on upstream earnings, although higher crude palm oil and sugar prices could provide a partial offset, we think,” she added.

Even though Wilmar recorded a 16.5 per cent jump in food product volumes, RHB analysts noted that margins retreated in Q3 due to higher raw material prices, as the company did not raise its average selling price.

Shares of Wilmar dipped 3.2 per cent or S$0.10 to S$3.01 as at 3.15 pm on Friday.