SINGAPORE (Nov 15): RHB Research is maintaining Wilmar International at “buy” with $3.59 target after 3Q18 results came in well ahead of expectations.

3Q18 revenue rose 4% y-o-y to US$11.6 billion ($16 billion) while core net profit rose 35% to US$434.7 million which brings Wilmar’s 9M18 core profit to 84% of the market’s full-year consensus.

See: Wilmar reports 10.7% rise in 3Q earnings to $564 mil on better Tropical Oils and Oilseeds & Grains results

Wilmar’s tropical oils business continued good downstream performances with profit before tax 93% y-o-y higher at US$155.5 million as there were better manufacturing and merchandising and downstream businesses. Downstream margins continued to be boosted by higher palm oil production volumes.

Oilseeds & grains saw another strong quarter as Wilmar continued to benefit from higher volume and good crush margins amid strong y-o-y sales volumes. Profit before tax improved 17% y-o-y to US$296.9 million.

Sugar saw slight improvement with profit before tax up 2% y-o-y at US$76.4 million riding on the back of strong performance in merchandising business but offset by losses in Wilmar’s new India sugar acquisition.

The “others” segment incurred a loss of US$7.4 million due to weaker fertiliser business and lower investment income while contribution from JVs and associates increased 30% to US$66.4 million largely on the group’s investments in Africa, China, Europe and Vietnam.

DBS analyst William Simadiputra believes Wilmar will be able to withstand the trade war tensions and continue to “book solid profitability” as it maximises crushing capacity and efficiencies.

In addition, Wilmar’s downstream on tropical oil division should also maintain their profitability amid the low CPO price environment.

‘At the current price, we believe that the market has fully priced in concerns over earnings fluctuation in its tropical oils as well as oilseeds & grains segments, on account of lower commodity prices,” says Simadiputra.

Possible share price driver includes IPO plan for its China operations.

Year to date, shares in Wilmar are up 2% at $3.20.