PETALING JAYA: The current CPO) rally is expected to boost the near-term earnings of plantation companies, particularly the pure upstream planters, say analysts.
Supportive fundamentals, including the US-Iran conflict, are driving a multi-channel shock that is lifting CPO via energy-linked demand and near-term supply tightness.
Furthermore, fertiliser-cost spikes could trigger crop switching to soybeans, capping medium-term upside while logistics disruptions also add temporary premiums.
Beyond geopolitical factors, Hong Leong Investment Bank (HLIB) Research, in a note to clients, said several positive developments would continue to underpin the plantation sector.
These include the finalisation of renewable fuel standards for 2026-2027 by the US Environmental Protection Agency, which should support soybean oil demand and indirectly CPO prices via substitution effects.
Amid the heightened probability of an El Nino event would exert a lagged negative impact on palm productivity, thus supporting palm product prices.
Another supportive factor is Indonesia’s push for B50 mandate full implementation that would require about 20.1 milliom kilolitres of biofuel annually (versus 15.6 million kilolitres with B40), implying an additional CPO consumption of about three million tonnes per annum.
For the reasons, HLIB Research raised its 2026 average CPO price assumption by RM150 to RM4,350 per tonne, reflecting tighter near-term supply conditions.
“We expect prices to remain elevated at RM4,500 to RM4,600 per tonne in the second quarter of 2026 (2Q26) before moderating from 3Q26 onwards.
“Our longer-term CPO price assumption is unchanged at RM4,200 per tonne from 2027, as supply conditions gradually normalise,” it added.
Based on HLIB Research’s estimates, every RM100 per tonne increase in its average CPO price projection would lift earnings forecasts for plantation companies under its coverage by 3% to 8%.
Following to the upward revision in 2026 CPO price assumption, the research house had also raised FY26 and FY27 earnings forecasts for planters under its coverage by 0% and 12.3%.
Meanwhile, an analyst with a bank-backed brokerage, cautioned that the current upcycle is likely to be front-loaded, with medium-term risks arising from supply-side adjustments in competing vegetable oils.
For targeted exposure, pure upstream planters that have already locked in their fertiliser for the year, which provides greater margin visibility, such as Johor Plantations Group Bhd
with a target price of RM1.98 and SD Guthrie Bhd at RM7.25 per share.
RHB Research, in a note to clients, said CPO prices had continued to rally (up 19% since the start of the US-Iran war to a year- to-date average of RM4,188 per tonne) on the spike in crude oil prices (surged 46% since the start of the war) and its repercussions – the biggest repercussion being likely higher biodiesel mandates in Indonesia, and globally.
Based on its sensitivity analysis, the research house said most planters’ share prices are still reflecting CPO prices of below RM4,400 per tonne.
Hence, it advised investors to adopt a tactically positive trading view, as planters should benefit as long as the Middle East conflict continues, given the higher leverage CPO prices have on earnings.
RHB Research’s top picks are Johor Plantations Group, Sarawak Oil Palms Bhd, IOI Corp Bhd, PT Perusahaan Perkebunan London Sumatra Indonesia Tbk, SD Guthrie and First Resources Ltd.
Although Indonesia’s B50 mandate is positive for the sector, the research house remained wary of geopolitical risks, which could cause extreme commodity price volatility.
Other catalysts include the El-Nino phenomenon and a China-US tariff conclusion.
