PETALING JAYA: Plantation companies are expected to post a stronger third quarter financial tear (3Q26) earnings sequentially due to higher production levels in the upstream segments and strong product prices.
Hong Leong Investment Bank (HLIB) Research anticipates core net earnings of upstream operations to improve notably, with output across companies under its coverage forecast to have expanded between 6% and 35.6% quarter-on-quarter (q-o-q).
The sector also enjoyed stable crude palm oil (CPO) prices as support in the quarter.
It stated Malaysia-centric planters such as Hap Seng Plantations Holdings Bhd
, Johor Plantations Group Bhd (JPG) and IOI Corp Bhd have outperformed industry peers in Indonesia in terms of output expansion in the period.
The research house added narrower CPO export tax differential, stable palm kernel prices and proactive restocking activities should provide near-term relief to downstream segment profitability as well on a q-o-q basis.
Hence HLIB Research expects earnings of planters under its coverage to be largely in line with its projections.
On a year-on-year (y-o-y) basis however, the downstream segment’s refining profitability is expected to remain under pressure from a wider y-o-y CPO export tax differential and persistent industry overcapacity.
“This may be partly mitigated by active restocking in the oleochemical segment, driven by geopolitical uncertainties and the impending implementation of the European Union deforestation regulation,” HLIB Research stated in a report.
Y-o-y, upstream earnings are expected to post growth, bolstered by higher fresh fruit bunch production and stronger palm product valuations, but partially tempered by elevated fertiliser costs.
The yield improvement forecast is supported by historical replanting done by most planters, but JPG could be the exception due to yield compression from accelerated replanting and moisture stress, HLIB Research noted.
HLIB Research reiterated its average CPO price projections at RM4,450 per tonne for 2026 and RM4,500 for 2027.
