Company Name: WILMAR INTERNATIONAL LIMITED
| Research House: Daiwa | Price Call: HOLD | Target Price: 5.50 |
Wilmar reported a 14% rise in its second quarter net profit on Friday on the back of strong margins in its core palm oil businesses.
Daiwa said Wilmar's plantations segment performed well for the quarter, driven partly by stronger production volumes and better average selling prices.
However, Daiwa justified the hold rating on the stock by saying Wilmar's valuations benchmarked on its past five-year averages and versus its peers suggest that the stock is fully valued, even after accounting for the company's strong exposure to emerging markets like China, India and Indonesia.
Downside risks include an economic slowdown and a reimposition of price controls on consumer pack oils in China, as well as poor timing of purchases of oilseeds, Daiwa said.
But value-accretive mergers and acquisitions could boost Wilmar's share price, it noted.
At 10:55 a.m., Wilmar shares were flat at $5.21. The stock has fallen more than 7% so far this year.
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