Wilmar International Limited (WIL) reported 2Q15 revenue easing 12% YoY to US$9284.8m, mainly due to lower commodity prices; but gross margin was stable at 7.7% (versus 7.4% in 2Q14) even though gross profit slipped 9% to US$712.1m. Reported net profit rose 18% to US$201.8m, while core earnings jumped 19% to US$193.6m. 1H15 revenue slipped 10% to US$1869.1m, meeting 42% of our full-year forecast, while reported net profit climbed 33% to US$443.0m; core earnings rose 21% to S$457.0m, meeting 37% of our FY15 estimate. WIL also declared an interim dividend of S$0.025/share, versus S$0.02 last year. Still, WIL believes that it has achieved "satisfactory" results in 2Q15 despite the tough conditions and lower CPO prices; it is also cautiously optimistic that 2H15 performance will be satisfactory. But with CPO prices likely to remain weak, we opt to pare our FY15 revenue forecast by 5% (FY16 also by 5%) and earnings estimate by 5% (FY16 by 2%). Because of the reduced forecasts, even as we push out our 13x valuation from FY15F to blended FY15/FY16F EPS, our fair value dips from S$3.50 to S$3.43. As there is still a 10% upside from here, we keep our BUY rating.
2Q15 results slightly below forecast
Wilmar International Limited (WIL) reported 2Q15 revenue easing 12% YoY to US$9284.8m, mainly due to lower commodity prices; but gross margin was stable at 7.7% (versus 7.4% in 2Q14) even though gross profit slipped 9% to US$712.1m. Reported net profit rose 18% to US$201.8m, while core earnings jumped 19% to US$193.6m. 1H15 revenue slipped 10% to US$1869.1m, meeting 42% of our full-year forecast, while reported net profit climbed 33% to US$443.0m; core earnings rose 21% to S$457.0m, meeting 37% of our FY15 estimate. WIL also declared an interim dividend of S$0.025/share, versus S$0.02 last year. Still, WIL believes that it has achieved "satisfactory" results in 2Q15 despite the tough conditions and lower CPO prices.
2H15 performance to remain “satisfactory”
Going forward, management is cautiously optimistic that its 2H15 performance will be “satisfactory” as well. For one, it expects crush margins to remain positive for the rest of the year; consumer products to continue its strong performance. On the other hand, WIL believes that Plantation and Palm Oil Mill performances will remain affected by the softer CPO prices; although refining margins are likely to be maintained for the Tropical Oils business with increased palm production and demand arising from lower CPO prices.
CPO prices likely to remain weak
Despite expectations that the El Nino effects will be a lot stronger this year (much drier than usual conditions), the sluggish global economic outlook as well as a weaker crude outlook could continue to weigh on CPO prices. As such, we opt to pare our FY15 revenue forecast by 5% (FY16 also by 5%) and earnings estimate by 5% (FY16 by 2%). Because of the reduced forecasts, even as we push out our 13x valuation from FY15F to blended FY15/FY16F EPS, our fair value dips from S$3.50 to S$3.43. As there is still a 10% upside from here, we keep our BUY rating.
Wilmar International Limited (WIL) reported 2Q15 revenue easing 12% YoY to US$9284.8m, mainly due to lower commodity prices; but gross margin was stable at 7.7% (versus 7.4% in 2Q14) even though gross profit slipped 9% to US$712.1m. Reported net profit rose 18% to US$201.8m, while core earnings jumped 19% to US$193.6m. 1H15 revenue slipped 10% to US$1869.1m, meeting 42% of our full-year forecast, while reported net profit climbed 33% to US$443.0m; core earnings rose 21% to S$457.0m, meeting 37% of our FY15 estimate. WIL also declared an interim dividend of S$0.025/share, versus S$0.02 last year. Still, WIL believes that it has achieved "satisfactory" results in 2Q15 despite the tough conditions and lower CPO prices.
2H15 performance to remain “satisfactory”
Going forward, management is cautiously optimistic that its 2H15 performance will be “satisfactory” as well. For one, it expects crush margins to remain positive for the rest of the year; consumer products to continue its strong performance. On the other hand, WIL believes that Plantation and Palm Oil Mill performances will remain affected by the softer CPO prices; although refining margins are likely to be maintained for the Tropical Oils business with increased palm production and demand arising from lower CPO prices.
CPO prices likely to remain weak
Despite expectations that the El Nino effects will be a lot stronger this year (much drier than usual conditions), the sluggish global economic outlook as well as a weaker crude outlook could continue to weigh on CPO prices. As such, we opt to pare our FY15 revenue forecast by 5% (FY16 also by 5%) and earnings estimate by 5% (FY16 by 2%). Because of the reduced forecasts, even as we push out our 13x valuation from FY15F to blended FY15/FY16F EPS, our fair value dips from S$3.50 to S$3.43. As there is still a 10% upside from here, we keep our BUY rating.
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