Analysts cut target price for Wilmar amid regulatory overhang, higher raw material costs
The company’s nine-month earnings for the period ended Sep 30 are below banks’ estimates
Analysts have lowered their target price for Wilmar International due to regulatory risks and higher raw material costs. CGS International reduced the target price from S$3.60 to S$3.15, while maintaining a "hold" rating. The reduction in target price comes from concerns regarding Indonesia's palm oil policies and haze-related investigations by the National Environmental Agency (NEA).
Wilmar's chairman and CEO, Kuok Khoon Hong, attended a meeting with senior leadership in Singapore where the government investigated companies connected to haze activities. Wilmar reported a Q3 profit of US$281 million for the period ending September 30, but its core net profit declined 22.9% from the previous year, after accounting for a one-off compensation expense.
The company attributed the decline to higher raw material costs, which were worsened by El Nino and geopolitical conflicts. Analysts expect El Nino risks and elevated Brent crude oil prices to keep raw material prices high, putting pressure on margins. Despite a 16.5% jump in food product volumes, margins still declined due to higher raw material prices, as the company did not increase its average selling price. Wilmar's shares fell 3.2% to S$3.01 by the end of trading on Friday.
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