DBS Vickers cut its target price on shares of palm oil firm Wilmar International to $3.90 from $4.25 and kept its hold rating, citing slower margin recovery for oilseeds and grains.
By 12:19 p.m., Wilmar shares were 2.3% lower at $3.47 and have fallen about 30% so far this year, compared to the Straits Times Index’s 13.7% rise.
DBS lowered its earnings estimates for Wilmar in 2012-2014 by 4-8% and also expects margins for its consumer business to compress for the next two years due to stronger feedstock costs.
Wilmar’s second-quarter earnings should recover by 36-56% to US$280-320 million ($354-$402 million) compared to the previous three months, DBS said, but contributions from consumer and sugar businesses are expected to be softer due to seasonally lower volumes.
“While the second half should see Wilmar benefiting from a 50% increase in Indonesian refining capacity and a seasonal uplift in crude palm oil output, we remain cautious on the counter given the intense competition in China oilseed crushing business and thin refining spreads in Malaysia and the EU,” said DBS.
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