Higher earnings: Rising yields & elevated prices on supply-demand shift. We reiterate our positive view and upgrade our NSSS’ earnings in 2025-27F (Figure 25) on the back of its young plantation profile allowing for rising yields (Figure 11) coupled with current elevated CPO prices forming a new equilibrium, underpinned by slowing supply growth in Malaysia and Indonesia. Note that CPO production in both countries had only risen 0–1% annually in recent years due to lack of replanting and limited workers. On the demand side, Indonesia’s expanding biodiesel mandates continue to provide strong structural support with the B50 mandate in 2026-27 alone requiring 15–16mn tons of CPO annually, absorbing 19.7–21.0% of total CPO production. Supply constraints and price support could intensify further if the government were to accelerate replanting program, as new trees take around four years to mature, producing some 5 t/ha, compared to over-25-year-old trees at ~19 t/ha.

 

Unlocking medium-term value through new CPO mill and planting. NSSS indicates construction plan for a third CPO mill near its PMM estate with capacity of 45–60 tph, aimed  at optimizing operations. Currently, all FFB in PMM must be transported to NSSS’ second CPO mill, 160 km away for processing, causing higher logistic costs and lower OER. Furthermore, management is seeking to monetize its greenfield assets by initiating new plantings in BSSU (2025) and HMA (2028) along with further planting in PMM this year. The initiative is expected to expand the company’s planting area by 1,500–2,000 ha per annum over the next seven years, while also offering strong operational synergies as both HMA and BSSU estates are located near the planned new CPO mill site.

 

Poised to capture re-rating on industry tailwinds; raised TP to IDR 550 - BUY. On valuation, we set DCF-based TP of IDR 550 for NSSS (WACC: 10.8%; terminal growth: 4.0%), implying 2026F EV/mature area of USD 29,824, 22.6% premium to regional peers (Figure 24). The premium reflects the company’s relatively young average plantation age of 10.7 years, supporting higher FFB yields and volume growth potential. We also see room for a sector-wide re-rating driven by 1) limited new planting opportunities; 2) tightening supply amid rising biodiesel demand, signaling structural shift in industry dynamics; 3) constraints from increasingly restrictive HGU (Hak Guna Usaha) permit approvals. Channel checks with major producers indicate no new HGU issuances for greenfield developments over the past three years. This has shifted expansion strategies toward acquiring existing estates, driving asset valuations higher. Our cross-checks show that EV/ha, which historically ranged between USD 5k–8k, has now settled at higher range of USD 10k–13k (Figure 12). BUY. Risks to our call: weaker-than-expected CPO prices, regulatory changes, and adverse weather.