Tight supply, strong demand to support CPO prices and plantation earnings
06/08/2026 (New Straits Times), Kuala Lumpur - Elevated crude palm oil (CPO) prices are expected to remain supported in the second half of 2026 (2H FY26) amid tightening global supply and resilient demand, providing a favourable earnings backdrop for plantation companies.
Hong Leong Investment Bank Bhd (HLIB) said for the upcoming reporting season (commencing Aug 11, 2026), the firm expects higher cropping trends and palm product prices to drive year-on-year (YoY) improvement in planters' upstream earnings.
"Overall, we anticipate results to come broadly in line with our projections, supported by year to date (YTD) palm product prices and production trends," it said in a note.
HLIB expects most plantation companies under its coverage to post stronger quarter-on-quarter (Q0Q) upstream performance, driven by the seasonal recovery in harvesting activity and firmer palm product prices.
"With the exception of Hap Seng Plantations Holdings Bhd, all other planters under our coverage registered sequential recovery in fresh fruit bunch (FFB) output, led by seasonally higher cropping patterns.
"Meanwhile, widened export tax and levy differential between Malaysia and Indonesia, coupled with higher palm kernel (PK) prices will likely weigh on downstream earnings during the quarter," it said.
HLIB maintained its average CPO price assumptions at RM4,450 per metric tonne for 2026 and RM4,300 per metric tonne for 2027.
Based on its estimates, every RM100 per metric tonne increase in average CPO prices would raise earnings of plantation companies under its coverage by between three and eight per cent.
Hap Seng Plantations remains HLIB's top sector pick with a "Buy" recommendation and a target price of RM2.89.
It noted that this is underpinned by its expectation that elevated CPO prices will be sustained through 2H FY26, supported by tightening supply conditions and resilient demand.
"We continue to favour planters with predominantly upstream operations and greater exposure to Malaysia, given their higher earnings leverage to CPO price strength and lower exposure to foreign regulatory and policy risks," it added.