IOI Corp's Operating Profit Remains Stable Amid Uncertainty In Donwstream Sub-segment - MIDF Amanah

KUALA LUMPUR, Nov 27 (Bernama) -- IOI Corp Bhd’s operating profit remains stable amid the uncertainty in the downstream sub-segment, driven by the low cost of production among its peers, circa RM2,300-RM2,600 per tonne, MIDF Amanah Investment Bank Bhd said.

In a note today, the research house has maintained its “buy” call on IOI Corp with a revised target price of RM4.42 as it rolls over its valuation base year to the financial year 2026 forecast (FY2026) earnings per share (EPS) of 20.5 sen pegged to a price earnings ratio of 21.6 times, at a five-year historical mean.

“Note that upstream operating profit accounts for 68-70 per cent of the total group operating profit in FY2025-2027. Therefore, any increase in the trajectory of crude palm oil (CPO) prices will significantly benefit the company,” it said.

Meanwhile, CIMB Securities Sdn Bhd has revised downwards its EPS forecasts on IOI Corp for FY2025–2026 by 2.0 per cent, factoring in a higher CPO price assumption of RM4,150 per tonne, higher minimum wages from February 2025 and a lower-than-expected profit margin in resource-based manufacturing in 1Q FY2025.

“We maintain our “buy” call, projecting a recovery in IOI Corp’s earnings in FY2025-2026, supported by stronger CPO prices and associate earnings. IOI has been on the lookout for sizeable upstream assets to grow its business.

“The group has ample room to expand its net gearing level, which stood at only 13 per cent as at June 30, 2024,” it said.

Despite improved refining margins following a higher CPO export tax imposed by the government effective this month, Public Investment Bank Bhd opined that the current high refined product prices could affect the buying interests for IOI Corp.

“In the oleochemical sub-segment, the recovery in the North Asia market demand and the normalising freight and logistics are expectedly to have a positive impact on its oleochemical segment,” it said.

-- BERNAMA