Research & Stock Picks

Company Reports

15 January 2025

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Plantation: Overweight with NSSS and TAPG as Top Picks

Strength

Rapid 2025F sector EPS growth of 26% (2024F: 740%) on the back of expected high average CPO price (+7.2% YoY to MYR 4,500/MT); solid sectoral CPO output growth of c. +3.9% (vs. -3.6% decline in 24F), partly driven by the end of El Niño in May 2024

 

Opportunity

The implementation of B40 (40% CPO-60% diesel fuel) in January 2025 and B50 (50% CPO-50% diesel fuel) in 2026 is expected to boost domestic CPO consumption, providing upward support for CPO prices

 

Weakness

Weaker volumes on WTO’s decision to uphold EU restrictions on palm oil use in biofuels which could exacerbate the downtrend in Indonesia’s CPO shipments to several EU countries (Netherlands, Italy, and Spain experienced aggregate -58% drop between 2013-23) and lead to oversupply

 

Threat

Lower prices due to the lifting of palm oil moratorium which may encourage CPO players to expand planting areas, leading to greater volumes, but higher opex (forest clearing, etc.) and margin pressure

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2025 Plantation Outlook

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2025 Plantation Outlook

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