InfoSAWIT, PETALING JAYA — Analysts assess that the prospects for the palm oil plantation sector remain "neutral" for next year, with crude palm oil (CPO) prices projected to range between RM4,200–RM4,300 per ton in 2025, and slightly weaken to RM4,000–RM4,200 per ton in 2026.
According to the latest Malaysian Palm Oil Board (MPOB) data for September, national palm oil stocks increased to 2.36 million tons, driven by rising exports not matched by domestic consumption, as well as increased imports and initial stocks.
MBSB Research's report states that the future direction of the CPO market remains "blurry" due to unstable supply and demand dynamics. One factor that could tighten supply is Indonesia's biodiesel policy, especially the plan to implement B50 in the second half of 2026.
However, despite palm oil having a significant discount compared to soybean oil, global demand has not shown significant growth.
“We are downgrading the ratings for Ta Ann Holdings Bhd and Sarawak Plantation Bhd shares due to limited upside potential,” MBSB wrote in its report quoted by InfoSAWIT from The Star, Monday (20/10/2025).
Conversely, MBSB now selects IOI Corp Bhd as a top pick with a "buy" recommendation and a target price of RM4.42, due to low production costs and high mill utilization supporting profit margins up to 40%.
Balanced Performance Amid Market Volatility
Phillip Capital Research estimates the average CPO price in 2025 at RM4,280 per ton, in line with projections of balance between supply and demand amid global market volatility.
The firm recommends Kuala Lumpur Kepong Bhd (KLK) with a target price of RM22.62, supported by efficient upstream operations and a healthy cost structure.
Meanwhile, TA Research maintains a "buy" recommendation for TSH Resources Bhd and United Malacca Bhd, and rates IOI Corp and Kim Loong Resources as "sell".
Potential Risks and Opportunities
MBSB assesses that potential price increases could occur if South American soybean supplies decrease, global vegetable oil demand improves, or CPO production costs drop significantly.
Positive Medium-Term Prospects
Unlike other institutions' views, Hong Leong Investment Bank (HLIB) Research gives an "overweight" recommendation for the sector. HLIB believes CPO prices have the potential to strengthen in the short to medium term, especially for companies focused on upstream operations in Malaysia.
HLIB positions SD Guthrie (target RM5.76) and Hap Seng Plantations Holdings Bhd (target RM2.29) as two key stocks.
SD Guthrie is valued for its diversification into renewable energy and industrial properties, while Hap Seng has a strong financial balance sheet and high leverage against CPO price movements.
According to Kenanga Research, after strong performance throughout 2025, palm oil sector profits are likely to flatten or slow in 2026. Many large companies are now diversifying their businesses beyond palm oil, such as into property, renewable energy, or biomass, as efforts to seek new growth sources. (T2)
