What is the news?

Wilmar  reported  3Q13  net  profit  (excluding  exceptional items)  of  US$391mn  (+59.3%  QoQ,  +0.7%  YoY),  which  is above  consensus  estimates  of  US$350mn.  This  brings 9M13 net  profit to US$950mn (+24.0%  YoY),  or 74%/73% of PSR/consensus full-year forecast.

How do we view this?

The  better  QoQ  performance  was  mainly  driven  by  higher Oilseeds  and  Consumer  product  margins  as  well  as turnaround  in  Sugar.  Palm  &  laurics  remained  steady  with robust  margin  and  volume;  this  indicates  the  division remains  strong  despite  the  industry’s  new  refining capacities. Plantation volume is up merely 4.7% QoQ   (but  -9.7%  YoY).  Management  highlights  lower  production  yield from  low  crop  trend  in  Sarawak,  delayed  peak  harvest season  in  Sabah  and  the  after  effects  of  dry  weather  in Kalimantan  and  Sumatra.  We  believe  the  biological  trends on palm plantations could be supportive to CPO prices.

Investment Actions?

Wilmar is able to realize volume growth and sustain margins despite  low  CPO  prices,  thanks  to  its  investments  in capacity  expansions,  new  businesses  and  downstream products over the past few years. We remain positive on the long-term  fundamentals  of  the  company.  We  raised  our earnings forecast for FY13E/14E/15E by 1%/5%/3% mainly on higher oilseeds and sugar volume assumptions. As such, we raised our target price to S$3.88 from S$3.61, based on our  new  blended  PE  (14.0x  FY14E)  and  DCF  valuations. Maintain Accumulate.

Source: PhillipCapital Research - 8 Nov 2013