PETALING JAYA: Johor Plantations Group Bhd
’s decision to move from being a pure upstream planter into an integrated player will bode well for the group, says Phillip Capital Sdn Bhd.
The research house added it continues to remain positive on the plantation company’s medium-term prospects.
“While the group continues to benefit from resilient crude palm oil (CPO) prices and strong cost discipline, particularly on fertiliser, we see 2026 as a year of consolidation, with softer production and margin normalisation.”
Phillip Capital also pointed out Johor Plantations’ Integrated Sustainable Oil Palm Complex and biomethane initiatives are expected to progressively enhance downstream integration, improve value capture and broaden earnings streams.
However, it cautioned that these growth-drivers are mostly back-end loaded, so contributions will be from next year onwards.
In addition, fertiliser, which is still the highest cost, will remain broadly flat in 2026 at about RM65mil due to advance procurement and locked-in contracts from the prior purchasing cycle.
For this year, the research house said it expects earnings to decline 13% year-on-year (y-o-y) to RM300mil, reflecting weaker production in the first half of 2026 (1H26), and margin normalisation from a high base in 2025.
It also said the production of fresh fruit bunches (FFB) will be rather flat at 1.1 million tonnes, weighed by weather disruptions, aggressive replanting activities and lagged biological effects.
For the first quarter, FFB production came in below expectations, declining 3% y-o-y and 36% on a quarterly basis to 205,000 tonnes.
“That said, production is expected to gradually recover from 2H26, consistent with seasonal trends. To mitigate lower internal crop, management has stepped up external FFB purchases to sustain mill utilisation, though this comes with slightly lower margins.
“Encouragingly, oil extraction rate trends remain supportive, partially cushioning the impact of softer yields,” Phillip Capital noted.
Hence, it will raise its 2026 to 2028 forecasts by 10% to 26%, factoring in higher CPO price and production assumptions, as well as lower operating cost assumptions.
“Following the earnings revisions and rolling forward our valuation horizon, our 12-month target price is raised to RM1.92 from RM1.53, based on a higher 15 times price-to-earnings multiple on 2027 earnings per share.”
The research house said key risks include production volatility, palm product price swings, cost inflation, regulatory uncertainties, geopolitical risk and broader macroeconomic uncertainties.
