Wilmar International's stock surged 3.01% in intraday trading on Friday, following news of the company's plans to increase its stake in AWL Agri Business, its joint venture with Adani Enterprises in India. The Singapore-based agribusiness giant is set to acquire an additional 11%-20% stake in AWL, on top of its existing 43.9% ownership.
Analysts at Nomura view this move positively for Wilmar. They highlight that AWL's edible oil brand, Fortune, holds approximately a 20% market share in India, and expect demand for the company's branded staple consumer products to rise. The increased stake could potentially result in a significant non-cash gain of US$1.23 billion for Wilmar in the second half of the year, equivalent to about 65% of its estimated FY 2025 net profit.
However, investors should note that Wilmar faces some challenges. The company's margin growth is likely to remain weak due to price competition in China and weak sugar prices. Additionally, an ongoing palm oil graft case in Indonesia could pose a near-term headwind. Despite these concerns, the market appears to be reacting positively to the potential benefits of Wilmar's expanded presence in the Indian market.
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