PETALING JAYA: Higher demand prospects anchored by improving biodiesel mandates, El-Nino risks affecting crude palm oil (CPO) supply and ongoing geopolitical conflicts will keep CPO prices elevated moving forward.
Most brokerage houses are “overweight” on the plantation sector, while projecting average CPO prices of RM4,300 to RM4,400 per tonne for this year and RM4,500 per tonne for next year.
In a note to clients, Apex Research said biodiesel mandates will continue to be a key demand catalyst with Malaysia’s B15 rollout incrementally supportive, while Indonesia’s B50 mandate could add 3.08 million tonnes of CPO feedstock demand, although utilisation-adjusted capacity constraints may temper demand momentum going into next year
“We continue to favour the plantation sector, supported by improving biodiesel-led CPO demand and the prospect of tighter stock levels as Indonesia and Malaysia move toward their blending mandates,” the research house noted in a report to its clients.
In the near-term, geopolitical conflict will also continue to support prices.
Moving into 2027, Apex Research has flagged a potential capacity constraint that could temper export demand momentum despite the otherwise supportive biodiesel demand outlook.
The research house maintained its “buy” calls on SD Guthrie Bhd
with a target price of RM7.01, Hap Seng Plantations Holdings Bhd at RM2.80 and Kuala Lumpur Kepong Bhd (KLK) at RM26.40 per share.
BIMB Research in a report said upstream-focused planters remained best positioned to benefit from elevated CPO prices, given their direct exposure to price movements and stronger operating leverage.
Hence, Hap Seng Plantations remains the top pick, with a target price of RM2.70 supported by strong earnings leverage to firm CPO prices, a strong balance sheet, and an attractive dividend yield of 4% to 5% for the financial year 2026.
Among the big cap player, BIMB Research said it favours SD Guthrie Bhd at a target price of RM6.90, supported by stable upstream earnings and diversified recurring income from industrial-park land monetisation.
The research house noted its higher CPO 2027 price average (forecast at RM4,500 per tonne) reflects the expected ramp-up in biodiesel demand and the potential lagged production impact from El Niño on next year yields.
Despite the recent correction in crude oil and vegetable oil prices following easing tensions in the Middle East, TA Research said in a report that it remained bullish on the plantation sector.
“We believe CPO prices should remain elevated in the near term.
“While the partial unwinding of the energy risk premium has softened some biodiesel-driven sentiment, structural demand fundamentals for palm oil remain intact,” it added.
The research house reiterated its “buy” ratings on SD Guthrie with a target price of RM7.36, KLK at RM27.36, IOI Corp Bhd at RM4.98, United Malacca Bhd at RM7.84, TSH Resources Bhd at RM1.67 and Kim Loong Resources Bhd at RM2.82.
Similarly, CIMB Research expects CPO prices to remain elevated owing to the ongoing US-Iran war, higher biodiesel mandates, and supply concerns arising from El Nino risks and rising fertiliser prices.
Further support for edible oil demand is expected from the implementation of B50 in Indonesia and B15 in Malaysia, alongside higher US biofuel requirements.
The key concern remains on feedstock availability to meet both food and biodiesel demand, given weather risks, with an 80% probability of an El Nino event between June and August 2026 as well as rising fertiliser prices, which could curb supply and force buyers to ration demand.
CIMB Research maintained a “neutral” call on the sector with IOI as its top pick.
Its CPO price forecasts also remained unchanged at RM4,400 per tonne for this year and RM4,500 per tonne for next year.
“These projections already incorporate the impact of Indonesia’s B50 mandate,” it added.
