PETALING JAYA: Kuala Lumpur Kepong Bhd
’s (KLK) earnings outlook is expected to strengthen in the second half of financial year ending Sept 30, 2026 (2H26), underpinned by firmer crude palm oil (CPO) prices, resilient fresh fruit bunches (FFB) production and gradual improvements in its downstream operations, according to analysts.
RHB Research upgraded its call on KLK to a “buy” from “neutral”, with a higher target price (TP) of RM23 versus RM22.30 previously, saying the group’s valuation had become more compelling after recent share price weakness.
“Going forward, FFB output could remain relatively stable, while the downstream and associate segments may see some improvements in 2H26,” the research house said, noting KLK’s valuation has retreated to a more attractive valuation of 17 times financial year 2027 (FY27) price-earnings ratio.
RHB Research noted that in the first seven months of FY26, FFB output decline had narrowed to 4.8% year-on-year (y-o-y), while the group maintained guidance for unit costs to stay flattish at around RM2,000 per tonne on expectations of higher output.
“We understand KLK has applied 50% of its fertiliser for the year, and has bought its FY26 fertiliser requirements at single-digit higher prices y-o-y.”
It said losses from refinery and kernel crushing operations had narrowed significantly, while oleochemical sales volumes were improving despite thin margins.
Hong Leong Investment Bank (HLIB) Research also upgraded KLK to a “buy” from “hold”, with an unchanged TP of RM21.90. “Near term earnings prospects remain intact, supported by resilient plantation operations, arising from mid-high single-digit FFB output growth and improving performance at the manufacturing segment.”
HLIB Research deemed KLK’s 1H26 core earnings as broadly within expectations as the group had yet to recognise its share of losses from its 21.3%-owned associate, Synthomer plc, in the latest quarter.
Kenanga Research maintained its “outperform” call on KLK and RM24.50 TP, and expects a stronger 2H26 driven by higher CPO prices and seasonal harvesting trends.
“Despite a strong harvest last year, the edible oil market already started 2026 with a tight supply outlook. The Middle East conflict provided support to CPO prices by raising biodiesel demand,” it said.
The research house maintained its FY26 and FY27 CPO price assumptions at RM4,250 per tonne and RM4,200 per tonne respectively, while highlighting improving FFB production following recovery from sooty mould attacks in Sabah and the introduction of Tanzanian weevils in Indonesian estates to improve yields.
Kenanga Research said KLK’s downstream business could gradually improve after operational restructuring and capacity expansion initiatives.
Meanwhile, MBSB Research maintained its “neutral” recommendation with an unchanged TP of RM20.15.
“We remain ‘neutral’ with its upstream subsegment, where recovery in the group’s FFB yield and oil extraction rate are projected to maintain above 21.5 tonnes per ha and a 21.5% rate over the next three years,” it said, noting that margin compression is anticipated to persist due to elevated feedstock costs and challenging oleochemical market conditions.
KLK posted a net profit of RM294.05mil in the second quarter ended March 31, 2026, compared with RM154.27mil a year earlier, while revenue rose to RM6.55bil from RM6.34bil. For 1H26, the group’s net profit increased to RM676.46mil from RM374.73mil previously, as revenue climbed to RM12.9bil from RM12.28bil.
