- 3Q14 core PATMI beat forecasts, up 10% YoY & 164% QoQ.
- Growth from Oilseeds & Grains and Sugar. Palm & Laurics margins remained depressed.
- Reiterate BUY with catalysts from return of growth. TP still at SGD4.08, 15x FY15E EPS. Still our sector top pick.
3Q14 core net profit of USD430m beat our USD350m forecast and market expectations. Although revenue declined 2.7% YoY due to lower consumer ASPs, margins outperformed. This lifted earnings by 10% YoY and 164% QoQ. While 9M14 EPS forms 81% of our FY14E, we leave our forecast unchanged to be conservative, considering its quarterly earnings volatility.
Oilseeds & Grains was its biggest source of growth, with PBT up 88% YoY on major improvements to its soybean-crushing operations in China. Sugar returned to a positive PBT of USD159m from last quarter’s losses on the start of the crushing season. We believe this momentum will spill into the next quarter. Palm & Laurics margins remained low, as expected, due to CPO refining overcapacity.
Still our top pick
Short term, USD strength and low oil & CBOT soybean prices should support 4Q14 results. We believe our FY14E can be easily met if soybean-crushing conditions in China remain good in 4Q14. Longer term, Wilmar should benefit from gradual improvements in China’s soybean-crushing margins as well as a potential sugar-price recovery. Reiterate BUY with SGD4.08 TP, at 15x FY15E EPS, its 5-year mean. Current 11.4x FY15E EPS and 1.0x P/BV valuations still offer a good entry point, in our opinion.
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