{"id":329480,"date":"2024-09-14T18:21:35","date_gmt":"2024-09-14T10:21:35","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=329480"},"modified":"2024-09-14T18:21:37","modified_gmt":"2024-09-14T10:21:37","slug":"special-report-palm-oil-boost-to-benefit-these-2-companies","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/special-report-palm-oil-boost-to-benefit-these-2-companies\/","title":{"rendered":"Special Report: Palm oil boost to benefit these 2 companies"},"content":{"rendered":"\n

Our View<\/strong><\/h3>\n\n\n\n

We see Monde Nissin Corp. (MONDE) and D&L Industries, Inc. (DNL) benefiting from sales volume growth, coupled with margin expansion in the coming quarters. We therefore recommend investors to BUY MONDE and DNL primarily on the back of the local palm oil industry\u2019s development, as well as expectations that inflation will remain moderate, which should translate to pick-up in demand.<\/p>\n\n\n\n

Analysis<\/strong><\/h3>\n\n\n\n

Addressing the production problem<\/strong><\/p>\n\n\n\n

At the recently concluded National Palm Oil Congress in Davao City, Ares Merchants Philippines Inc. (AMPI), a leading supplier of vegetable oils, expressed their optimism about the industry\u2019s expansion.<\/p>\n\n\n\n

AMPI\u2019s Managing Director said that they expect an increase of around 2,500 to 5,000 ha in palm oil cultivation in the Philippines, which would be a much-needed progression to address the underutilization of our palm oil manufacturers who are only currently operating at 65% capacity. <\/p>\n\n\n\n

We note that the Philippines is currently only producing around 104,000 metric tons (MT) of palm oil which translated to 8% of the total palm oil demand of roughly 1.25-Mn MT in 2022, which led to the need to import the remaining 92% or 1.15-Mn MT. Even if the 5,000-ha annual increase in palm oil cultivation forecasted by AMPI materializes, it will only translate to an 8,000 MT increase in local supply per year, or 0.6% of the local demand. The local supply shortfall underscores the massive potential for the industry\u2019s growth in the future.<\/p>\n\n\n\n

Subdued prices to boost margins<\/strong><\/p>\n\n\n\n

The growth of the local palm oil industry would be a positive for companies that utilize palm oil as one of their key commodity inputs for production. Top of mind would be MONDE, with palm oil accounting for 6% of the company\u2019s 1H 2024 COGS for the APAC BFB segment. <\/p>\n\n\n\n

A larger domestic palm oil industry would essentially mean that the company would have a lesser need to lock-in prices as they would have access to local supply.<\/p>\n\n\n\n

Another company that uses palm oil as a key input is DNL. We note that their margins posted substantial declines during the surge of palm oil and coconut oil prices from 2019 to 2022 with 2Q19 gross profit margin (GPM) of 22.5% taking a nosedive to 11.1% by 4Q 2021. The decline in palm oil prices beginning 2022 however, has helped the company expand its margins once more, rising by 420bps from in 2Q 2024 as a result of lower costs.<\/p>\n\n\n\n

<\/div>\n\n\n\n

This report is prepared by PinoyInvestor\u2019s partner broker below. Find out more about our partner brokers<\/a> and sign up to avail their complete trading brokerage services.<\/em><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Here\u2019s a commentary on an important issue or event affecting the stock market<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1124,11],"tags":[],"class_list":["post-329480","post","type-post","status-publish","format-standard","hentry","category-commentaries-special-reports","category-special-reports","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"_links":{"self":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/329480","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/comments?post=329480"}],"version-history":[{"count":1,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/329480\/revisions"}],"predecessor-version":[{"id":329482,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/329480\/revisions\/329482"}],"wp:attachment":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/media?parent=329480"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/categories?post=329480"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/tags?post=329480"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}