Wilmar International Limited (WIL) saw strong QoQ recovery in 3Q14. Revenue was up 9.5% QoQ (-2.7% YoY) at US$11520.8m, reported NPAT jumped 147.5% QoQ (+1.5% YoY) to US$422.4m; core earnings surged 163.5% QoQ (+9.9% YoY) to US$429.7m. 9M14 revenue came in at US$32307.2m, down 0.5%, but still met 70% of our full-year estimate, while reported NPAT fell 20.5% to US$755.0m; core 9M earnings slipped 15.0% to US$807.4m, meeting 76% of our forecast. While we are keeping our FY14 and FY15 estimates unchanged, we are more confident of WIL meeting our numbers. Meanwhile, we are pushing out our 12.5x valuation peg from blended FY14/FY15F EPS to FY15F EPS, which raises our fair value from S$3.24 to S$3.47. As there is a sufficient 10% upside from here, we upgrade our call to BUY.
Strong QoQ recovery in 3Q14
Wilmar International Limited (WIL) reported its 3Q14 results last night; although YoY performance looked slightly muted, WIL did see strong QoQ recovery. Revenue was up 9.5% QoQ (-2.7% YoY) at US$11520.8m, reported NPAT jumped 147.5% QoQ (+1.5% YoY) to US$422.4m; core earnings surged 163.5% QoQ (+9.9% YoY) to US$429.7m. 9M14 revenue came in at US$32307.2m, down 0.5%, but still met 70% of our full-year estimate, while reported NPAT fell 20.5% to US$755.0m. Core 9M earnings slipped 15.0% to US$807.4m, meeting 76% of our forecast.
Improvement in Oilseeds & Grains
According to management, the better profitability was aided by the continued recovery in its Oilseeds and Grains business, lower feedstock prices, and higher contributions from its sugar business; but this was offset by margin contractions in Palm and Laurics. As highlighted before, Indonesia continues to see excess refining capacity in the industry, which management expects to persist for quite a while more.
Outlook remains largely upbeat
Nevertheless, WIL continues to expect a better 2H14 showing, driven by several factors. For one, it expects crushing margins in China to remain positive in 4Q14, although they may not be as good as those seen in 3Q. Secondly, it also believes it should benefit from the continued improvements in its Rice and Flour business heading into the traditional festive season. Thirdly, its Sugar business is typically its strongest in 3Q and 4Q, and expects to see slightly higher milling volumes this year.
Upgrade to BUY with new S$3.47 fair value
While we are keeping our FY14 and FY15 estimates unchanged, we are more confident of WIL meeting our numbers. Meanwhile, we are pushing out our 12.5x valuation peg from blended FY14/FY15F EPS to FY15F EPS, which raises our fair value from S$3.24 to S$3.47. As there is a sufficient 10% upside from here, we upgrade our call to BUY
Wilmar International Limited (WIL) reported its 3Q14 results last night; although YoY performance looked slightly muted, WIL did see strong QoQ recovery. Revenue was up 9.5% QoQ (-2.7% YoY) at US$11520.8m, reported NPAT jumped 147.5% QoQ (+1.5% YoY) to US$422.4m; core earnings surged 163.5% QoQ (+9.9% YoY) to US$429.7m. 9M14 revenue came in at US$32307.2m, down 0.5%, but still met 70% of our full-year estimate, while reported NPAT fell 20.5% to US$755.0m. Core 9M earnings slipped 15.0% to US$807.4m, meeting 76% of our forecast.
Improvement in Oilseeds & Grains
According to management, the better profitability was aided by the continued recovery in its Oilseeds and Grains business, lower feedstock prices, and higher contributions from its sugar business; but this was offset by margin contractions in Palm and Laurics. As highlighted before, Indonesia continues to see excess refining capacity in the industry, which management expects to persist for quite a while more.
Outlook remains largely upbeat
Nevertheless, WIL continues to expect a better 2H14 showing, driven by several factors. For one, it expects crushing margins in China to remain positive in 4Q14, although they may not be as good as those seen in 3Q. Secondly, it also believes it should benefit from the continued improvements in its Rice and Flour business heading into the traditional festive season. Thirdly, its Sugar business is typically its strongest in 3Q and 4Q, and expects to see slightly higher milling volumes this year.
Upgrade to BUY with new S$3.47 fair value
While we are keeping our FY14 and FY15 estimates unchanged, we are more confident of WIL meeting our numbers. Meanwhile, we are pushing out our 12.5x valuation peg from blended FY14/FY15F EPS to FY15F EPS, which raises our fair value from S$3.24 to S$3.47. As there is a sufficient 10% upside from here, we upgrade our call to BUY
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