Higher Palm Product Prices To Boost Planters’ Upstream Earnings -- HLIB
KUALA LUMPUR, Nov 4 (Bernama) -- Higher palm product prices and seasonally stronger fresh fruit bunch (FFB) output are expected to lift most planters’ upstream earnings in the upcoming results season starting Nov 5, particularly on a quarter-on-quarter basis, said Hong Leong Investment Bank (HLIB).
The investment bank said six of the seven planters under its coverage recorded positive quarter-on-quarter output growth in the third quarter of 2025 (3Q2025), supported by the seasonal uptick in cropping patterns.
“Broadly higher FFB output, firmer palm product prices, and stable production costs are expected to drive sequential improvement in upstream earnings among planters,” HLIB said in a sector update note.
However, it noted that downstream performance is likely to remain subdued in 3Q2025 due to persistent competition and refinery overcapacity in Indonesia, which continue to pressure refining margins. Elevated feedstock costs and weak demand in the oleochemical sub-segment are also weighing on performance.
Five of the seven planters under HLIB’s coverage registered modestly higher FFB output in 3Q2025.
HLIB said broadly stronger FFB output and palm product prices — particularly palm kernel — along with lower crude palm oil (CPO) production costs stemming from reduced fertiliser prices, though partly offset by Malaysia’s higher minimum wage since February 2025, would likely lift upstream earnings in 3Q2025.
The bank maintained its 2025 and 2026 CPO price assumptions at RM4,300 and RM4,200 per metric tonne, respectively, and kept its “overweight” stance on the plantation sector.
Year-to-date, the CPO price has averaged RM4,351 per metric tonne.
“We prefer planters with greater exposure to Malaysian upstream operations, given their high leverage to CPO prices and minimal exposure to land confiscation risks,” said HLIB.
It added that key re-rating catalysts for CPO prices include worse-than-expected La Nina conditions, which could curb palm and soybean output in South America, and smooth implementation of the B50 biodiesel mandate in Indonesia.
-- BERNAMA