Planters likely to deliver mixed 2Q23 performance
17/08/2023 (New Straits Times), Kuala Lumpur - Planters will likely register a mixed performance for their second quarter ended June 30, 2023 (2Q23) results, with most planters' year-on-year performance affected by a decline in upstream plantation earnings.
Hong Leong Investment Bank (HLIB) Research said quarter-on-quarter performance will likely be affected by fresh fruit bunches (FFB) output growth and slightly lower crude palm oil (CPO) prices.
"Year-on-year, most planters will likely register decline in their upstream plantation earnings, mainly on the back of significantly lower palm oil prices, and higher CPO production cost arising from minimum wage hike, elevated fertiliser prices and higher diesel prices," HLIB Research said.
The research unit said despite easing labour shortage in Malaysia estates, only four out of six planters under its coverage registered higher FFB production.
"FGV Holdings Bhd and Sime Darby Plantation Bhd still registered year-on-year decline in their second quarter (Q2) 2023 FFB output (by 18.6 per cent and 1.9 per cent respectively).
"This is due to less favourable weather conditions (at FGV's estates) and below-potential harvester's productivity," it said.
Year to date, CPO price averaged at RM3,916 per tonnes.
HLIB has maintained its CPO price assumption of RM4,000 per tonnes for 2023.
"This is backed by the arrival of El Nino, coupled with potentially stronger demand (arising from palm's improved price competitiveness, weak ringgit and low palm oil stock levels among major palm consuming countries) to support CPO price in the second half of 2023 (2H23).
"Moving into 2024, we maintain our projected CPO price of RM3,800 per tonnes, based on the assumptions that El Nino will turn out to be a moderate one and El Nino to dissipate in end-2023.
"We maintain our Neutral stance on the sector. For exposure, our top pick is IOI Corporation Bhd (Buy; target price: RM4.30) given its commendable valuations," it added. Ends