PETALING JAYA: Sarawak Oil Palms Bhd
(SOP) is expected to see an earnings recovery trend ahead, underpinned by firmer crude palm oil (CPO) prices and stabilising production, even as cost pressures and downstream uncertainties persist.
BIMB Research said the group’s near-term outlook remains anchored to price support and modest output growth.
“We remain cautiously optimistic on SOP’s earnings outlook, supported by firmer CPO prices and modest production growth (our target: 3% year-on-year or y-o-y),” it noted.
The research house added that upstream strength would be the main driver, pointing out: “While earnings should benefit from stronger CPO prices, driven by the US-Iran war and biodiesel demand, cost pressures – especially fertiliser – remain a risk.”
BIMB Research projected that CPO prices would average at RM4,400 per tonne in 2026.
On downstream operations, it said disclosures remain limited, cautioning: “Not much disclosure on the downstream segment, but we believe this segment will remain challenging amid intense competition, particularly in refining.”
It added that biodiesel should provide a cushion as the segment is likely to remain resilient, supported by steady offtake from Sarawak’s blending mandate.
BIMB Research has maintained a “hold” rating for SOP with a target price (TP) of RM4.40, pegged to eight times 2026 earnings.
Meanwhile, Phillip Capital Research revised its earnings assumptions higher for SOP, lifting its 2026 to 2028 earnings forecasts for the company by 10% to 16% after adjusting CPO and palm kernel price assumptions.
Reflecting improved valuation assumptions, the research house raised its 12-month TP to RM4.77 from RM3.87 based on a higher nine times price-earnings (PE) multiple, up from eight times, on revised 2027 earnings.
“Our higher ascribed PE multiple reflects SOP’s resilient earnings profile and our expectation of a firmer CPO price environment in 2027, supported by a ramp-up in biodiesel demand and a potential lagged impact of El Nino on palm oil yields,” it explained.
Nonetheless, Phillip Capital retained a cautious view, focusing on cost inflation and margin pressure from downstream operations. As such, it maintained a “hold” call on SOP.
RHB Research highlighted that SOP’s first quarter of 2026 (1Q26) performance was broadly within expectations, with earnings supported by stable upstream contributions despite higher input costs.
It noted unit costs edged up in the quarter, largely due to weaker fresh fruit bunch output.
For 2026, RHB Research noted that SOP has already locked in 70% of its fertiliser needs at prices 15% to 20% higher y-o-y.
It added that fertiliser application remains on track.
“Despite the higher fertiliser prices, management hopes to be able to keep unit costs flattish y-o-y from some streamlining and consolidation of operations,” the research house said.
“Nevertheless, the remaining 30% of its fertiliser requirement could see some supply uncertainty and pricing adjustments due to the tight fertiliser market currently,” it said.
RHB Research reiterated a “buy” on SOP, maintaining its earnings forecasts for the company and TP of its shares at RM4.25.
Citing upside potential under stronger CPO assumptions, it said that at CPO prices of RM4,400 to RM4,500 per tonne, the implied TP based on an unchanged nine times 2026 PE would be between RM5.30 and RM5.80.
SOP’s 1Q26 net profit fell 43.47% y-o-y to RM64.31mil, while revenue was largely unchanged at RM1.44bil.
Moreover, earnings per share stood at 7.16 sen.
The board proposed a six-sen final dividend, which will go ex-dividend on June 29 and be paid on July 17.
