PETALING JAYA: The plantation sector is well poised to be a net gainer as the current surge in energy prices supports more elevated crude palm oil (CPO) prices, with little impact on its food and biofuel-driven demand, say analysts.
This is amid the risk of higher global inflation and slower economic activity dampening many other sectors.
Both Kenanga Research and Apex Securities Research have upgraded the sector to “overweight” from neutral previously, given strong fundamentals ahead.
In a note to clients, Apex Research said: “At this juncture, considering the persistence of Middle East tensions, elevated energy prices, and the potential rollout of Indonesia’s B50 mandate in the second half of 2026 (2H26), we believe it is prudent to review our CPO price assumptions.”
Reflecting current CPO price levels amid ongoing geopolitical tensions, the research house expects CPO prices in the second quarter of 2026 to average at RM4,600 per tonne before moderating to RM4,400 per tonne in 2H26.
Based on the average of March prices of RM4,356 per tonne, Apex Research noted that this brings its average 2026 CPO price assumption to RM4,400 per tonne.
“The moderation in our assumptions is driven by seasonal production growth during the period.
“However, approaching 2H26, we continue to observe the Relative Oceanic Nino Index readings for increasing signs of El Nino events,” the brokerage added.
Following its higher CPO assumptions, Apex Research has revised earnings for the stocks under its coverage and upgraded “buy” calls for SD Guthrie Bhd
with a target price of RM6.96, Hap Seng Plantations Holdings Bhd at RM2.80, Kuala Lumpur Kepong Bhd (KLK) at RM26.40 and Sarawak Plantations Bhd at RM3.81 respectively.
Meanwhile, an analyst with a local brokerage firm said: “While escalating energy costs are causing fertiliser and transport costs to rise for planters, on the whole the sector is set to be a net beneficiary due to higher CPO prices.
“As the bulk of palm oil is traded within Asia, more muted impact on CPO prices is expected but an upgrade is still warranted for 2026 to 2027 CPO forecast prices, from RM4,100 per tonne to RM4,250 per tonne for 2026 and RM4,200 in 2027 as we expect CPO prices to spike in the second quarter then ease gradually to around RM4,200 come late 2026 and into 2027,” he pointed out.”
Cost wise, higher energy prices are set to push up the cost of fertiliser and transport. In percentage terms, fertilisers typically make up 10% to 15% and transport 3% to 5% of total cost.
Note that many planters have tendered out and already locked in about half their 2026 fertiliser requirements at lower prices.
In a report, Kenanga Research said its sector picks are KLK with a target price of RM24.50, given its better fresh fruit bunch (FFB) output and property earnings.
PPB Group Bhd is also a sector pick at RM14.85 for its earnings recovery amid low valuation and TSH Resources Bhd at RM1.60 from its organic upstream growth.
It has also upgraded IOI Corp Bhd to an “outperform” with a higher target price of RM4.55 due to good FFB growth and higher CPO prices.
At the same time, it has revised upward the target prices for planters between 1% and 5% on higher CPO price assumptions of RM4,250 per tonne in 2026 and RM4,200 per tonne in 2027, up from RM4,100 per tonne previously.
Looking ahead, Kenanga Research is watchful for any policy measures undertaken, including price caps on cooking oil or restriction of exports to mitigate the impact of rising living costs.
Currently, planters in Malaysia are also paying windfall taxes while those in Indonesia just faced a higher export levy (from 10% to 12.5%) from March 1, 2026.
