India’s plan to restrict its sugar exports should not have a significant impact on Wilmar International as it mostly sells its sugar domestically, according to analysts at RHB Group Research.

For the first time in six years, India plans to restrict sugar exports to prevent a surge in domestic prices. This could potentially cap this season’s exports at 10 million tonnes, the analysts point out.

“India is the world's biggest sugar producer and the second biggest exporter behind Brazil. Heatwaves have withered fields in India, prompting a government order dated May 13 to restrict shipments and safeguard domestic supply.

“It is making exceptions on export restrictions only for prior commitments made by private traders through irrevocable letters of credit, and for exports to countries that require wheat for food security needs, based on the requests of their governments,” they add.

In India, Wilmar owns the majority stake in Shree Renuka Sugars, which has seven mills with a total cane crushing capacity of 8.4 million tonnes and two port-based refineries with a combined capacity of 1.8 million tonnes, selling sugar under the Madhur brand. It is the largest refiner in India.

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Sugar is captured under two segments in Wilmar’s earnings — the feed and industrial product segment, which comprises the sugar trading business; and the palm oil and sugar milling segment, which represents 1.7% of its revenue. As Wilmar mostly sells sugar domestically, it should not be significantly affected by the ban.

The analysts highlight that there could, however, be a slight negative impact if the ban is extended into the next marketing year, which starts October.

There are no changes to RHB’s earnings estimates. The analysts maintain “buy” on Wilmar with a target price of $5.10.

As at 10.23am, shares in Wilmar are trading 2 cents higher or 0.48% up at $4.12.

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