Broker Name: CGS International
Date of Report: April 21, 2025
Wilmar International Downgraded to Hold Amid Indonesian Uncertainty
Summary
- CGS International has downgraded Wilmar International (WIL) from “Add” to “Hold,” citing increased uncertainty in the Indonesian market.
- Despite an expected 18% year-over-year earnings growth in FY25F, the downgrade reflects concerns over potential land confiscation and ongoing legal investigations in Indonesia.
- The target price has been lowered to S\$3.15 from S\$3.47, based on a reduced P/E ratio of 10x FY26F earnings.
- Analyst Jacquelyn Yow is transferring coverage in this note. [[1]]
1Q25 Results Preview: Expected Net Profit Improvement
- Wilmar is expected to report a net profit ranging from US\$360m to US\$380m for 1Q25F. [[1]]
- This represents an improvement both quarter-over-quarter and year-over-year (4Q24: US\$355m; 1Q24: US\$328m). [[1]]
- The growth is primarily attributed to improved soybean crushing margins and better palm oil refining margins, supported by lower feedstock costs. [[1]]
- However, this was partially offset by lower contributions from the food products segment due to muted sales volume and higher promotional expenses. [[1]]
Key Growth Drivers for 1Q25
- Higher contribution from the feed and industrial segments, driven by: [[2]]
- Improved soybean crushing margins due to competitive feedstock pricing and a positive soybean crushing environment in China. [[2]]
- Positive shift in China’s soybean crushing margin, averaging Rmb404/tonne in 1Q25 compared to negative margins in previous quarters. [[2]]
- Robust soybean crushing margins in China, supported by delayed soybean harvests in Brazil and limited domestic soybean oil supply. [[2]]
- Improved palm oil refining margins due to lower feedstock prices, with CPO prices slightly down from RM4,840/tonne in 4Q24 to RM4,713/tonne in 1Q25. [[3]]
Uncertainties in Indonesia: Potential Land Loss and Legal Issues
- The Indonesian government’s plan to confiscate over 1m hectares of allegedly illegal private oil palm plantations poses a risk to Wilmar’s land holdings (150k ha in Indonesia). [[1]]
- A 5% loss of Wilmar’s land in Indonesia could result in an estimated 1.5% decline in net profit. [[1]]
- A recent bribery investigation linked to a 2022 palm oil export corruption case in Indonesia, where Wilmar was previously a defendant, now has a Wilmar legal officer named as a suspect. [[1]]
- This introduces uncertainty for Wilmar, although the investigation is ongoing. [[1]]
Resilient Feed and Industrial Segment Margins
- Wilmar’s soybean crushing margin is expected to remain relatively unaffected in 2025F. [[1]]
- The company has secured most of its soybean supply from Brazil for the year. [[1]]
Recommendation and Target Price
- Downgraded to Hold (previously ADD). [[1]]
- Target price: S\$3.15 (previous: S\$3.47). [[1]]
- The target price is pegged to 10x FY26F P/E (-0.5 s.d. from its 5-year historical average) vs. 11x previously. [[1]]
- This accounts for increased uncertainty in the Indonesia market. [[1]]
Upside and Downside Risks
- Upside risks: Stronger-than-expected consumption in China supporting better profitability of its food products segment. [[1]]
- Downside risks: Unfavorable court ruling from litigation in Indonesia and any escalation of trade tensions between China and the US, which may result in higher operating costs. [[1]]
Peer Comparison
The following table compares Wilmar International to its peers based on various financial metrics: [[4]]
| Company |
Ticker |
Recom. |
Price (lcl curr) |
TP (lcl curr) |
Market Cap (US\$ m) |
CY25F FD Core P/E (x) |
CY26F FD Core P/E (x) |
3-year EPS CAGR (%) |
CY25F Net Gearing (%) |
CY26F Net Gearing (%) |
CY25F Recur. ROE (%) |
CY26F Recur. ROE (%) |
CY25F EV/ EBITDA (x) |
CY26F EV/ EBITDA (x) |
CY25F P/BV (x) |
CY26F P/BV (x) |
CY25F Div. Yield (%) |
CY26F Div. Yield (%) |
| Wilmar International |
WIL SP |
Hold |
3.13 |
3.15 |
14,900 |
12.8 |
10.9 |
-6.0% |
95.9% |
91.1% |
5.8% |
6.8% |
9.9 |
8.7 |
0.8 |
0.7 |
5.3% |
5.3% |
| IOI Corp Bhd |
IOI MK |
Reduce |
3.65 |
3.25 |
5,130 |
18.5 |
16.5 |
5.3% |
9.8% |
6.1% |
10.3% |
11.0% |
11.9 |
10.2 |
1.9 |
1.8 |
2.7% |
3.0% |
| Genting Plantations Bhd |
GENP MK |
Hold |
4.90 |
5.90 |
996 |
14.7 |
14.9 |
10.1% |
23.7% |
21.1% |
5.5% |
5.5% |
7.3 |
7.1 |
0.8 |
0.8 |
4.1% |
4.0% |
| Kuala Lumpur Kepong Bhd |
KLK MK |
Hold |
21.40 |
22.25 |
5,026 |
43.3 |
16.2 |
22.8% |
56.0% |
51.3% |
3.3% |
9.8% |
10.1 |
9.0 |
1.6 |
1.5 |
3.2% |
3.7% |
| SD Guthrie Bhd |
SDG MK |
Add |
4.64 |
5.20 |
7,270 |
na |
20.0 |
20.9% |
7.6% |
22.6% |
1.6 |
1.6 |
-93.5% |
8.0% |
NA |
9.4 |
2.9% |
3.0% |
ESG Assessment
- Wilmar is a member of the FTSE4Good Developed Index, FTSE4Good ASEAN 5 Index, and Dow Jones Sustainability Indices. [[5]]
- Ranked number one in the 2022 assessment by the Sustainability Policy Transparency Toolkit (SPOTT) with an improved total score of 93.2%. [[5]]
- LSEG ESG Combined Score: B-. [[5]]
- FTSE Russell ESG rating: 3.8. [[5]]
- MSCI rating: A. [[5]]
- Sustainalytics ESG Rating: High Risk. [[5]]
- S&P Global ESG score: 75. [[5]]
Key ESG Considerations
- Wilmar prohibits any form of forced, trafficked, or bonded labor within its operations or supply chains. [[5]]
- Directly recruits workers in Indonesia and Malaysia and directly pays for all recruitment fees. [[5]]
- Commitment to reduce GHG emissions intensity by 15% for all its palm oil mills by 2023, against its 2016 baseline. [[5]]
Financial Summary
| (US\$m) |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Revenue |
67,155 |
67,379 |
73,970 |
77,300 |
80,825 |
| Operating EBITDA |
3,642 |
3,602 |
4,058 |
4,142 |
4,311 |
| Net Profit |
1,525 |
1,170 |
1,380 |
1,467 |
1,501 |
| Core EPS (US\$) |
0.28 |
0.19 |
0.22 |
0.23 |
0.24 |
| Core EPS Growth |
(31.9%) |
(33.8%) |
17.9% |
6.4% |
2.3% |
| FD Core P/E (x) |
8.48 |
12.80 |
10.86 |
10.21 |
9.97 |
| DPS (US\$) |
0.13 |
0.13 |
0.13 |
0.13 |
0.13 |
| Dividend Yield |
5.31% |
5.32% |
5.28% |
5.28% |
5.28% |
| EV/EBITDA (x) |
10.25 |
9.93 |
8.70 |
8.53 |
8.15 |
| P/FCFE (x) |
6.17 |
NA |
12.25 |
20.86 |
16.08 |
| Net Gearing |
100% |
96% |
91% |
88% |
85% |
| P/BV (x) |
0.74 |
0.75 |
0.73 |
0.71 |
0.69 |
| ROE |
8.80% |
5.84% |
6.84% |
7.06% |
6.99% |
