PETALING JAYA: Plantation companies are expected to post weaker upstream performance, but show improvement in the downstream segment for the upcoming first quarter of 2026 (1Q26) results season, which kicks off tomorrow.
Hong Leong Investment Bank (HLIB) Research, in its sector results preview, said seasonally weaker cropping and softer palm product prices could result in planters recording a quarter-on-quarter (q-o-q) decline in their 1Q26 upstream performance.
“However, despite expectations of broadly weaker upstream performance both q-o-q and year-on-year (y-o-y), the results should largely track our projections, supported by improved crude palm oil (CPO) price sentiment,” the research house further said.
The downstream performance will likely improve q-o-q, supported by a narrower export tax and levy differential between Malaysia and Indonesia, as well as lower palm kernel prices, despite a still-challenging operating environment amid ongoing overcapacity.
Similarly, planters will likely register y-o-y declines in their upstream earnings in 1Q26, due to lower palm product prices and higher production costs arising from higher fertiliser prices, amid mixed fresh fruit bunch (FFB) output trends.
Despite a robust 11.1% increase in Malaysia’s FFB output, three of the seven planters under HLIB Research’s coverage reported y-o-y declines, reflecting uneven production trends.
“We believe this was primarily due to adverse weather conditions in parts of Indonesia, which disrupted harvesting and constrained crop evacuation for some planters with exposure there,” added the research house.
Year-to-date, the CPO price has averaged RM4,280 per tonne.
HLIB Research – which maintained its 2026 CPO price assumption of RM4,350 per tonne – said, “We expect prices to remain elevated at RM4,500 to RM4,600 per tonne in 2Q26, before moderating from 3Q26 onwards.
“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%.”
For targeted exposure, the research house advocates purer upstream planters that have already locked in their fertiliser costs for the year – providing greater margin visibility – such as Johor Plantations Group Bhd
with a target price of RM1.98 and SD Guthrie Bhd at RM7.25.
Meanwhile, BIMB Research highlighted in its report that the implementation of Malaysia’s B15 biodiesel mandate, effective June 1, marks a transition from policy planning to execution.
The research house said this phased rollout is supported by established infrastructure and production from 19 licensed biodiesel plants.
It noted that the demand impact will remain modest, with B15 expected to add about 334,000 tonnes per annum – representing 1.6% of 2025 CPO output – providing incremental but supportive domestic absorption.
According to BIMB Research, biodiesel blending economics have strengthened with the widening palm oil-gas oil spread, as palm oil is now trading at a discount of about US$122 per tonne to gas oil.
The research house maintained its average CPO price forecast at RM4,400 per tonne in 2026 and RM4,500 per tonne in 2027.
BIMB Research, which is “overweight” on the sector, said upstream players will remain as the key beneficiaries of elevated CPO prices.
