Company Name: WILMAR INTERNATIONAL LIMITED
| Research House: Citigroup | Price Call: BUY | Target Price: 4.08 |
Wilmar’s JV with Kellogg is a move to tap opportunities in the packaged and processed food segments before China fully matures, recycling Wilmar’s market and network strength from primary foods, Citigroup says.
It notes these were the “supporting thoughts” on Wilmar taking a 10% stake in Australian consumer-brand-maker Goodman Fielder earlier this year. The house notes Wilmar’s consumer segment is among the smallest of its five divisions, contributing only 4%-12% of pretax earnings.
“While contributions from this JV will take time, growth at its consumer division will help reduce the earnings volatility at Wilmar, especially as processed foods unlike primary foods are less impacted by government anti-inflation policies. There is good growth headroom for the JV as Kellogg-Wilmar believes that sales in cereals/snacks alone in China is estimated at US$12 billion (or $14.7 billion versus US$6.8 billion for Wilmar’s consumer packs last year).”
Citigroup rates Wilmar at Buy with a $4.08 target. The stock is up 2.2% at $3.26.
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