PETALING JAYA: IOI Corp Bhd
is poised for a multi-year production recovery, with stronger earnings and wider margins over the financial year 2027 (FY27) to FY28, underpinned by maturing replanted areas, improved planting materials, and productivity enhancements through mechanisation.
In a note, Phillip Capital Research forecast a FY27 and FY28 core net profit of RM1.43bil and RM1.45bil, respectively, with earnings before interest, taxes, depreciation, and amortisation margins improving to 20.6% and 21.2%.
“We believe IOI remains well-positioned to deliver sustainable earnings growth, with its integrated business model and downstream value-added operations providing resilience across commodity price cycles,” the research house said.
FY26 core net profit estimates, however, were trimmed by 2.5% to RM1.45bil, largely reflecting lower-than-expected palm kernel (PK) production based on FY26 actual operating data.
Following the 4% year-on-year fresh fruit bunch (FFB) production growth in FY26 to 2.96 million tonnes, Phillip Capital has raised the FFB production forecasts for FY27 to FY28 by 1.2% to 3.06 million tonnes and 3.19 million tonnes, respectively, reflecting a recovery supported by improving estate age profile and superior planting materials.
Phillip Capital remains positive on IOI’s production outlook, noting production has already bottomed in FY23 and now recovery momentum is likely to continue, given favourable current weather conditions.
Meanwhile, it said the lower PK production outlook – with FY27 to FY28 production forecasts trimmed by 2% to 4% due to a more conservative kernel extraction rate – is more than offset by stronger FY26 to FY28 PK average selling price assumptions, which were raised by 23% to 31%.
Phillip Capital said IOI’s disciplined replanting strategy, focused on replacing aged palms with high-yielding clonal and tissue culture planting materials, is expected to support sustainable production growth, higher yields, and improved profitability over the longer term.
At the same time, IOI is said to be progressively redesigning estate layouts during replanting to facilitate greater mechanisation, while also accelerating the adoption of electric-powered (EV) estate machinery, the research house highlighted.
“We view the continued investment in mechanisation and wider adoption of EV machinery positively, as it should improve estate productivity, strengthen cost competitiveness, partially mitigate structural labour shortages, and support the group’s long-term environmental, social, and governance objectives,” the research house said.
It reiterated its “buy” recommendation on the stock with a raised target price of RM5.04, up from RM4.65 previously, based on a higher 22 times price-to-earnings multiple on 2027 forward earnings per share.
Phillip Capital said the higher valuation multiple reflects its increasingly constructive medium-term view on the plantation sector, on the back of firmer crude palm oil price expectations, sustained tight vegetable oil supplies and improving biodiesel demand dynamics.
