CGS-CIMB raised its target price on Wilmar International : F34 0% to S$4.82 from S$4.68, to reflect the market capitalisation of the group&rsquo s subsidiaries, Yihai Kerry Arawana and Adani Wilmar.

 

The new target price implied a valuation of 12 times the brokerage&rsquo s estimated FY2023 price-to-earnings (PE) for the group, which was also in line with the stock&rsquo s historical 10-year mean PE. 

 

In a report on Tuesday (Feb 21), CGS-CIMB analyst Ivy Ng said she expects a more challenging FY2023 for Wilmar, after the group reported FY2022 results that exceeded the brokerage&rsquo s expectations by 6 per cent.

 

In the research house&rsquo s view, FY2022&rsquo s record results will be &ldquo tough to beat&rdquo as it was deemed an exceptional year for the group, given a lower-than-expected effective tax rate recorded in the second half of the year. 

 

Wilmar is projected to record a 16 per cent year-on-year decline in FY2023, based on CGS-CIMB&rsquo s expectations of lower crude palm oil (CPO) prices, a lower palm-processing margin and a higher effective tax rate. 

 

Average CPO prices are expected to fall by 25 per cent. The group&rsquo s mid-to-downstream palm business is also expected to record lower profit margin, due to less volatility in commodity prices.

 

These factors may nonetheless be partially offset by higher profit in the food products segment, on the back of decreased raw material costs. 

 

The segment posted a 6 per cent rise in profit before tax (PBT) in FY2022. This was due to the US$175.6 million gain on dilution of interest in Adani Wilmar, which was recognised in Q1 FY2022.

 

Excluding this gain, Ng estimated that this segment would have posted a 20 per cent decline in PBT, because of higher raw material costs and lower consumer products sales volumes in China.

 

CGS-CIMB maintained its &ldquo add&rdquo call on Wilmar and said it continues to like the stock for its &ldquo attractive&rdquo FY2023 PE valuation multiple of 10 times and dividend yield of 4 per cent.

 

While the group&rsquo s final dividend of S$0.11 missed the brokerage&rsquo s estimate of S$0.21, Ng highlighted that Wilmar managed its operations well, amid high volatility in the commodity markets in FY2022.

 

SINGAPORE &ndash Agribusiness group Wilmar International will pay out a record dividend after posting robust second-half figures on Tuesday.

 

The bumper result was due to improved profits across key segments and higher contributions from associates and joint ventures including Adani Wilmar, its tie-up with India&rsquo s embattled Adani Group.

 

Net profit rose 8.6 per cent to US$1.2 billion (S$1.6 billion) for the six months to Dec 31, up from US$1.1 billion in the same period a year earlier.

 

Revenue increased 2.8 per cent to US$37.3 billion due to stronger turnover in both the feed and industrial products, and plantation and sugar milling segments.

 

Wilmar&rsquo s board has proposed a final dividend of 11 Singapore cents a share for the six-month period, which will come on top of the interim dividend of six Singapore cents paid out last August.

 

That will bring the total payout for the 2022 financial year to 17 Singapore cents &ndash the highest the firm has paid since listing in August 2006.

 

Net profit for the full year was up 27.1 per cent to US$2.4 billion on the back of an 11.6 per cent gain in revenue to US$73.4 billion.

 

Noting that 2022 was an &ldquo exceptional year&rdquo , Wilmar chairman and chief executive Kuok Khoon Hong said: &ldquo We benefited from increased palm oil and sugar prices, good palm processing margins and higher shipping profit due to increased freight rates.&rdquo

 

The company added that it is business as usual for India-listed Adani Wilmar.

 

Adani Group has lost billions in market value in the past two months after New York-based short-seller Hindenburg accused the conglomerate of widespread corporate malfeasance, including market manipulation and accounting fraud.

 

Adani Wilmar was incorporated in 1999, and is now one of India&rsquo s fastest-growing packaged food companies, supplying essentials such as edible oil, wheat flour, rice, pulses and sugar. The company was recently listed on India&rsquo s National Stock Exchange and Bombay Stock Exchange.

 

&ldquo It should be noted that the recent Hindenburg report did not raise any issues specific to Adani Wilmar. Business is as usual,&rdquo Wilmar said.

 

It added that Adani Wilmar&rsquo s day-to-day operations are run by independent managers with Wilmar contributing knowledge and experience in the commodity and consumer food products businesses with Adani providing local logistical and regulatory support.

 

In addition, the Adani Wilmar board is chaired by an independent director.

 

Mr Kuok said that 2023 will be &ldquo challenging&rdquo for the agribusiness giant, as plantation profits and palm processing margins are &ldquo expected to be under pressure&rdquo .

 

However, he added that China&rsquo s reversal of its zero-Covid policy is positive for the business.