Wilmar International（WLIL.SI）Cautiously optimistic of a better 2H

Investment Rating - The report maintains a "Buy" rating for Wilmar International with a 12-month price target of S$4.20, down from a previous target of S$4.60 [6][5]. Core Insights - Management expressed a cautiously optimistic outlook for the second half of the year, anticipating improvements in milling margins and plantation profits due to lower raw material prices and reduced fertilizer costs [2][3]. - The impact of the recent El Niño has led to a 6% decline in group FFB production in the first half, prompting a downward revision of FY24 production growth expectations to a low single-digit decline (<5%) [3]. - Wilmar's integrated business model and diverse product range are seen as competitive advantages, allowing the company to maintain production cost competitiveness and relevance to consumers [4]. Summary by Sections Financial Performance - FY24-26E earnings estimates have been reduced by 5-8% due to lower expectations for China's recovery, with net earnings projected at US$1.76 billion for FY24, down from previous estimates [5][7]. - The company is trading at a multi-year low valuation of 7.7x forward P/E and 0.7x P/B, indicating significant undervaluation [5]. Production and Market Conditions - The report notes that production is expected to recover in the second half of the year, with a peak anticipated in the fourth quarter [3]. - Consumer downtrading trends in China are acknowledged, but management remains confident in the company's ability to adapt and maintain stable sales volumes [4]. Valuation Metrics - The forecast price appreciation is estimated at 35.9%, with a forecast dividend yield of 4.1%, leading to a total forecast stock return of 40.0% [11]. - The market capitalization of Wilmar International is reported at S$19.4 billion (approximately US$14.7 billion) [6].