Brokers' take: Analysts maintain 'buy' on Wilmar as valuations look attractive

ANALYSTS have maintained their “buy” rating on Wilmar International as they view its valuation as attractive.

In a report on Thursday (May 5), RHB said the stock is “severely undervalued” given its imminent future value-unlocking exercises.

The analyst noted that the stock is trading at just 10 times the brokerage’s estimates for FY2022 earnings, compared to its China-listed peers which are trading at 26 to 39 times. RHB, however, lowered Wilmar’s target price to S$5.10 from S$5.30, after cutting its estimates for FY2022 to FY2024 earnings by 3 to 4 per cent, to account for the impact of the China lockdowns and weak demand from poultry and swine farmers.

The target price has a potential upside of 16.2 per cent from Wilmar’s last trading price of S$4.39 on Thursday as at 1.59 pm. Wilmar was trading 0.5 per cent or S$0.02 lower at the time.

Meanwhile, Citi on Wednesday maintained a target price of S$6.08 on the counter, which represents a potential upside of 38.5 per cent.

Wilmar announced its first-quarter earnings last Friday which saw its net profit climb 17.8 per cent to US$530.3 million on the back of firm palm oil prices. Core net profit – excluding non-operating gains recorded from the group’s investment portfolio – rose 18.8 per cent to US$503.4 million during the quarter.

The company’s first-quarter revenue was 23.2 per cent higher at US$17.6 billion, compared with US$14.3 billion in the year-ago period.

RHB said Wilmar’s first-quarter performance was in line with expectations, considering the headwinds from China’s Covid-19 lockdowns and Indonesia’s export ban.

As for Citi, it also expects these challenges to be short-lived.

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Wilmar posts 18% rise in Q1 net profit to US$530 million

Besides expecting Wilmar to be a net beneficiary of food inflation pressure, Citi believes that Wilmar’s China operations will be more profitable in the second quarter – driven by a recovery in volumes as well as better downstream consumer pack performance due to price adjustments made prior to recent lockdowns.