Wilmar

Wilmar: JPM notes Wilmar and COFCO, which together control more than half the consumer pack cooking oil market in China, have reportedly increased prices for their rapeseed oil (+ 3.5 to 10%) and peanut oil (+ 7 to 9%) in China. This is the first price increase for 2012.
Rapeseed and peanut oil accounts for <20% of Wilmar’s consumer pack cooking oil volume, the majority being soybean oil.

Meanwhile, JPM estimates China’s back-to-back crush margin troughed in late Mar, and has recovered ~40% since. Believes oilseeds crush margin for both Wilmar and China Agri-Industries would likely remain weak in 1Q12 (similar to 4Q11), but will recover in 2Q12, which should be positive for both players.

JPM believes the latest round of price increase is likely to provide some relief to raw material cost pressures. Estimates every US$10/mt increase in oilseeds & grains / consumer pdts margins will increase Wilmar’s earnings by 9.2% / 2.1% rptvly. Assumes FY12E oilseeds &grains margins at US$23/mt, consumer pdts at US$30/mt.
The house has an Overweight rating on Wilmar with TP $4.82.