The research house said it forecasts double-digit earnings growth on the back of encouraging performance from the upstream plantation and oleochemical business.
"Margins for the refinery segment are expected to remain depressed partly due to the suspension of CPO export duty.
"Nevertheless, we believe it is still profitable at this juncture due to the considerable gap between palm olein and CPO prices.
"As for oleochemical segment, despite the surge in CPO prices, the margins were holding up as the prices of palm kernel, which is their main feedstock, did not move in tandem with the CPO prices," it said.
Meanwhile, the surge in demand for the personal hugience and pharmaceutical products due to the concern over the Covid-19 ourbreak has helped to bolster oleochemical sales.
IOI said despite forecast 7.2% FFB production growth for the first two months of FY21, full-year growth is expected to be flat or slightly lower due to the aggressive replanting programme carried out.
This will be offset by the increased crop production from its young plantation in Indonesia.
PublicInvest noted that the group has been accelerating its replanting programme since last year, which saw over 10,000ha of ageing oil palm trees in Sabah being replanted in FY20.
It added that IOI is looking to replant up to 12,000ha.
"Over the next four years, it plans to carry out large-scale replanting programme as ageing plantation currently stands at 58,379ha or 33% of total planted area. As for new planting, there is a balance of 900ha in Kalimantan, which will be completed by early next year," it said.
PublicInvest maintained its target price of RM4.80 on IOI, which is 9.1% above Friday's last traded price of RM4.40.
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