PETALING JAYA: Analysts expect crude palm oil (CPO) prices to remain elevated at the RM4,400 to RM4,600 per tonne level in the first half of 2026 (1H26) amid higher crude oil prices triggered by the Middle East conflict with stronger earnings prospects for upstream plantation companies.
The latest statistics released by the Malaysian Palm Oil Board also showed that palm oil stock declined to 2.27 million tonnes in March – the largest inventory drawdown since March 2023 – as strong exports and lower imports outweighed higher production.
In a note to clients, Hong Leong Investment Bank (HLIB) Research said its average CPO price assumption was maintained at RM4,350 per tonne for 2026, while its longer-term CPO price assumption was unchanged at RM4,200 per tonne from 2027, as supply conditions gradually normalise.
“Based on our estimates, every RM100 per tonne increase in our average CPO price projection would lift earnings forecasts for plantation companies under our coverage by 3% to 8%,” it added.
HLIB Research, which is “overweight” on the sector, however, cautioned that the current CPO price upcycle is likely to be front-loaded, with medium-term risks arising from supply-side adjustments in competing vegetable oils.
For targeted exposure, the brokerage firm advocates for purer upstream planters that have already locked in their fertiliser cost for the year, which will provide greater margin visibility such as Johor Plantations Group Bhd
at a target price of RM1.98 and SD Guthrie Bhd at RM7.25.
Kenanga Research in a report cited that the inelasticity in exports to higher prices suggested rising food security concerns arising from the Middle East conflict.
“As such, whether the current Middle East conflict sees a ceasefire or otherwise, supportive demand for edible oils, including palm oil, is expected as buyers stock up for another quarter or two.”
The research house, which maintained the CPO price at RM4,250 per tonne for 2026 and RM4,200 per tonne for 2027, said it preferred planters offering value and growth such as Kuala Lumpur Kepong Bhd (KLK) at a target price of RM24.50, PPB Group Bhd at RM14.85 and TSH Resources Bhd at RM1.55.
Kenanga Research also expects a brighter outlook for upstream planters.
According to Kenanga Research, most planters should see good earnings in 2026 with tighter margins in 2027 but still robust profits. Its top picks were planters offering value and earnings growth such as KLK at a target price of RM24.50, PPB at RM14.85 and TSH at RM1.55.
It also likes IOI Corp Bhd at RM4.55 for its sector leading return on equity (ROE) and United Malacca Bhd at RM6.70 for its encouraging ROE uptick.
Looking ahead, MBSB Research maintained a positive call on the sector, albeit on a tactical basis, supported by a narrowing palm oil-gas oil spread.
The research house said it revised its 2026 CPO price assumption to RM4,300 per tonne to incorporate potential upside from firmer energy prices, although demand visibility remains limited at this stage.
TA Research, meanwhile, continues to view the current environment as supportive for palm oil, with elevated crude oil prices effectively putting a floor under CPO prices.
This reinforces its “overweight” stance on the sector, as “we believe the risk-reward remains skewed favourably to the upside, particularly if energy prices stay firm”.
