CPO price to stay above RM4,000 per tonne in next few months: HLIB
10/11/2022 (New Straits Times) - KUALA LUMPUR: Crude palm oil (CPO) price will likely sustain at above RM4,000 per tonne over the next few months, supported by near-term supply concerns and palm's price competitiveness.
Hong Leong Investment Bank Bhd (HLIB) said CPO price would likely remain at the level until the first quarter (Q1) 2023, supported by uncertainties on the fate of Black Sea Grain Corridor, which was set to expire on Nov 19 this year.
HLIB said lower near term palm supply arising from seasonally low palm oil production cycle and the onset of La Nina would help to sustain CPO prices.
"Favourable palm oil-gasoil (POGO) spread and CPO's wide discount against soybean oil, which encourage palm oil consumption, and easing concerns on Indonesia's palm oil stockpiles will also support the proces," it said.
This is due to the better supply visibility for vegetable oils, heightened risk of global recession and inventories build up in key palm oil importing countries.
"We lowered our CPO price assumptions for 2022-2023 to RM5,050 per tonne from RM5,500 per tonne earlier and RM4,000 per tonne from RM4,500 per tonne earlier.
"This is mainly to reflect weaker CPO prices in Q3 2022, and better supply visibility and the absence of a demand catalyst.
"CPO price assumption for 2024, on the other hand, remains unchanged at RM3,800 per tonne," it said.
HLIB said the earnings forecasts of individual planters (arising from lower CPO price assumptions) would be reviewed in the upcoming results season.
"We maintain our Overweight stance on the sector, supported by commendable valuations and high near-term CPO prices.
"For exposure, our top picks are Kuala Lumpur Kepong Bhd (Buy; target price: RM27.27) and IOI Group Bhd (Buy; TP: RM4.65)," it added.