The Edge Markets (08/10/2025) - Hong Leong Investment Bank (HLIB) upgraded the plantation sector to "overweight" from "neutral", driven by a significantly brighter outlook for crude palm oil (CPO) prices.

The research firm based its optimism on the firm CPO price trend that will likely sustain into the near- to medium term, possibly until the first quarter of 2026.

"The firm CPO price trend will likely sustain into the near- to medium term (possibly until 1Q2026), due to several supporting factors including (i) the potential return of La Niña, which will likely curb supplies of palm oil and soybean (particularly, South America’s crops in early-2026), (ii) higher biodiesel mandate in Indonesia, and (iii) renewed concerns on slowing palm output growth.

Consequently, HLIB raised its CPO price assumptions to RM4,300 per metric tonne for 2025 and RM4,200 for 2026 to reflect the stronger than expected year-to-date price performance and continued market tightness.

Following this upward revision, it raised earnings projections for planters under its coverage by 0.3% to 15.8%.

"Earnings forecasts aside, we took the opportunity to adjust our valuation parameters (particularly for planters with high exposure in Indonesia, given uncertainties arising from the Indonesian government’s move to land confiscation), which has led to a -8.8% to 12.6% change to our TPs (target prices)".

However, HLIB's ratings on individual planters remain unchanged despite these target price adjustments.

Within the sector, the research firm favoured SD Guthrie Bhd (KL:SDG)  for its efforts to diversify earnings and its decent dividend yield.

It also liked Hap Seng Plantations Holdings Bhd (KL:HSPLANT) for its solid net cash position and high operational leverage to CPO prices.

Edited By Isabelle Francis

Read more at https://theedgemalaysia.com/node/773179