Singapore-headquartered Wilmar International’s recent site visit in China revealed the company’s extensive operations and its strategic plan to expand through food parks. However, analysts from RHB Group maintain a neutral stance on the company’s stock, with a target price of SGD3, citing potential delays in profitability due to ongoing economic uncertainties. The company’s valuation is expected to remain lower than its China-listed counterparts until a significant earnings turnaround occurs.
The visit highlighted Wilmar’s vision to increase its footprint in China, a market with vast potential. Despite the impressive scale of operations, the economic landscape poses challenges that could delay the profitability of these ventures. “We were impressed with the size and scale of Wilmar International’s operations in China,” noted the analysts, but they cautioned that it might take a couple of years for the expansion to become profitable.
The company’s strategy involves leveraging food parks to drive growth, a move that aligns with its long-term vision. However, the analysts emphasised that the current economic uncertainties could hinder immediate financial gains. Until Wilmar’s earnings show a significant improvement, its stock is likely to trade at a discount compared to its peers in China.
In conclusion, whilst Wilmar International’s expansion in China is promising, the path to profitability may be prolonged due to economic factors. The company’s future performance will largely depend on its ability to navigate these challenges and achieve a turnaround in earnings.
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