Wilmar

Wilmar: JP Morgan note that China Agri (606.HK) announced that its 2H12 net profit is expected to be comparable to that of 2H11. This is driven by a strong recovery in oilseeds processing margin in 2H12 which is in line with house view for the sector. Believe both Wilmar and China Agri share prices will react positively on this news. However, see more upside to consensus earnings estimates for Wilmar given the more conservative oilseeds margin assumption imputed by the Street. House US$15/MT oilseeds & grains margin assumption for FY13E may still have upside. EveryUS$10/MT increase translates to 11% increase to Wilmar EPS. Key downside risks: are (1) losses from palm oil and/or oilseeds arising from wrong directional trades; (2) margin compression from competition. Key upside risks: (1) correction in soybean price providing relief to crush margin; (2) ability to increase cooking oil price to pass on cost increase to consumers