Driving More Positive Impact
Wilmar earned its accolades in 2021 and is still working towards its targets of 100%
traceability to the mills by 2023 and 100% RSPO by 2025 for all their palm oil
management units. Wilmar is also committed to net-zero emissions by 2050. They also
recently announced their NDPE Sugar policy to ensure sustainability for the sugar
sector. Maintain BUY. Target price: S$5.50.
WHAT’S NEW
• Wilmar International (Wilmar) is one of the best in sustainable practices in the palm industry.
They are ranked first in the SPOTT scoring by Zoologist Society of London, listed in the
World Dow Jones Sustainability Index and have many other awards for their sustainability
efforts. Wilmar remains committed to their sustainability journey. Below are some of the
sustainability initiatives Wilmar made and their upcoming targets moving forward:
a) NDPE commitments for palm. As of Dec 21, 98.2% (23.6m tonnes) of Wilmar’s palm oil
is traceable to the mills and 83.5% of volume across Wilmar’s global supply chains is from
suppliers that have at least company group-level commitment/action plans to address
NDPE requirements, whereas 68% of its global supply chain is traceable to the estates.
Wilmar targets to hit 100% traceability to the mills by 2023.
b) No exploitation; support for smallholders. Wilmar had also emphasised on human
rights such as child protection, the women’s charter and more. They also published a
human rights framework in Dec 21, a first in the palm sector. Smallholders account for
7.1% of Wilmar’s FFB supply base and are given high-yield seedlings, high quality
fertilisers and training on sustainable agronomic practices. With these, the yield from the
smallholders has also improved significantly.
c) Roundtable on RSPO certification. Wilmar targets to achieve Sustainable Palm Oil
(RSPO) certification for all their palm oil management units (mills and supplying
plantations) by 2025. Wilmar used about 13% of total RSPO production. While Wilmar is
trying to increase the usage of RSPO, Wilmar’s refinery capacity is at 23.6m tonnes but
there is only 14m tonnes of RSPO-certified production and hence there is not enough
RSPO production capacity for Wilmar’s refineries.
d) Climate changes. About 57% of the energy used by Wilmar was derived from renewable
energy in 2021. Wilmar’s GHG emission also dropped by 3% yoy in 2021. The group had
also recently committed to net-zero emissions by 2050. To achieve this, Wilmar is working
with climate consultants to map out Wilmar’s Scope 3 emissions, verifying Scope 1& 2
GHG emissions with third-party auditors and developing the roadmap to 2050.
e) NDPE Sugar policy. Wilmar introduced the No Deforestation, No People Exploitation
Sugar (NDPE Sugar) policy in Sep 21. The objective is to work with their suppliers, and to
improve their sustainability for long term benefit. There is no time bound plan yet. Having
said that, 80% of their sugar refineries are covered for traceability to the mills currently.
ESSENTIALS
• Plasma smallholders in Indonesia. Out the total hectares owned by scheme smallholders,
11.7% in Indonesia and Ghana are RSPO-certified. On top of that, Wilmar had fulfilled the
Indonesian government’s requirement of provide community plantations (plasma) up to an
area of at least 20% of the total concession area of the company. Currently, Wilmar has a
total planted area of over 34,032ha under government-originated plasma schemes and
currently has fully met the regulation requirements.
• Increasing demand for sustainability certified palm products. 91% of the RSPO
production is sold as RSPO and other schemes such International Sustainability & Carbon
Certification (ISCC). The management had also shared with us that the other sustainability
certification for palm such as Malaysia Sustainable Palm Oil (MSPO) and Indonesia
Sustainable Palm Oil (ISPO) as the production for RSPO-certified palm oil supply is lower
than the demand and buyers turned to other sustainable certifications.
EARNINGS REVISION/RISK
• Maintain earnings forecasts. Our current net profit forecasts are US$1.78b, US$1.82b and
US$2.0b for 2022, 2023 and 2024 respectively.
VALUATION/RECOMMENDATION
• Maintain BUY with target price of S$5.50. Our target price is derived using the SOTP
valuation by pegging a 2022F PE of 17x for the China operations and a blended 11x PE for
the non-China operations.
SHARE PRICE CATALYST
• Stronger recovery in China operations.
• Surprise margin upside from the good timing in sourcing of raw materials.