KUALA LUMPUR: IOI Corp Bhd
’s fresh fruit bunch (FFB) production output is expected to climb further in its financial year ending June 30, 2026 (FY26), supporting upstream earnings amid firm crude palm oil (CPO) prices, although downstream operations remain pressured by competition and weak demand.
In FY25, FFB output rose 1.3% year-on-year (y-o-y), in line with guidance, while CPO’s average selling prices (ASPs) gained 12% to RM4,332 per tonne, and palm kernel (PK) prices surged 50%.
According to RHB Research, IOI has guided FFB growth of 3% to 5% y-o-y for FY26.
In view of this, the research house has lifted its FFB growth forecast to 3% to 4% from 2% to 3%. It noted that IOI’s FY25 core earnings were within expectations, coming in at 99% to 101% of its and consensus projections.
“Going forward, we expect its upstream earnings to continue doing well on the back of elevated CPO prices, while the group is embarking on new ventures to diversify its income stream,” it said.
However, the research house flagged weakness in the downstream segment, where refining and oleochemical divisions slipped into losses in fourth quarter ended June 30, recording a core earnings before interest and tax margin of negative 1.8% compared to 2.4% in the preceding quarter.
“This was likely due to the increased competition in Indonesia due to higher tax levies from May 2025,” it added.
RHB Research reiterated a “buy” call on IOI with a higher target price (TP) of RM4.40, up from RM4.30, citing attractive valuations at 17.5 times the 2026 forecasted price-to-earnings, which is at the lower end of the peers’ 17 to 20 times range.
Meanwhile, CGS International (CGSI) Research maintained a more cautious stance, keeping its “hold” call with an unchanged TP of RM3.70.
It projects IOI’s FFB production to grow 6% y-o-y in FY26, driven by more young palms maturing despite ongoing replanting in Sabah.
“Coupled with firmer CPO prices, we expect the plantation segment to perform better in FY26,” CGSI Research said.
“While we like IOI for its better-than-peer downstream margins, we expect the group to remain under pressure from competition in Indonesia and higher feedstock prices, partially offset by higher CPO ASP and sales volumes for its upstream segment,” it noted.
Kenanga Research, on the other hand, expects IOI’s upstream earnings to “ease but stay good over FY26 to FY27,” underpinned by firm CPO prices.
It raised its FY26 CPO price forecast to RM4,100 per tonne from RM4,000 due to firmer-than-expected CPO prices thus far in 2025.
The research house said global edible oil supply should rise in 2026 but remain tight, limiting any significant price weakness, with CPO expected to hold around RM4,000 per tonne into FY27.
However, the research firm said IOI’s downstream earnings are likely to stay subdued in FY26.
Kenanga Research kept its FY26 forecast core earnings per share at 22 sen and introduced a forecast of 22.3 sen for FY27.
While maintaining its TP at RM4.10, it downgraded its call from “outperform” to “market perform”, citing expectations of stagnant earnings in FY26 and FY27, with the share price already close to fair value.
