Kuala lumpur: Kenanga Investment Bank Bhd forecasts crude palm oil (CPO) prices to stabilize around RM4,000 per tonne by 2026, a slight decrease from RM4,308 in 2025 due to persistent global edible oil supply limitations despite an increase in supply.

According to BERNAMA News Agency, Kenanga Investment Bank mentioned in a research note that while some cost increases are anticipated, upstream margins are expected to remain stable. The bank noted that downstream visibility is limited, but it anticipates more significant contributions from property and renewable energy sectors, suggesting a shift in focus among integrated plantation groups towards enhancing asset yields.

The investment bank highlighted that poor yields in Indonesia during 2024 pushed CPO prices to RM4,700-4,800 per tonne in the last quarter of 2024 and the first quarter of 2025, before settling to around RM4,000. Indonesia's decision to maintain its B40 biodiesel blend and delay the adoption of a B50 blend beyond mid-2026 also influences the cautious price outlook.

Kenanga maintains a 'Neutral' stance on the sector, citing limited growth and upside potential balanced by healthy profits and strong balance sheets with reasonable valuations. The report suggests that while smaller players offer good value, larger integrated and diversified companies may better withstand softer palm oil prices.

The investment bank's top picks include Kuala Lumpur Kepong Bhd, with a target price of RM24.00 per share for improved fresh fruit bunch output and property earnings; PPB Group Bhd, with a target price of RM12.50 per share, due to its earnings recovery amid low valuation; and TSH Resources Bhd, with a target price of RM1.55 per share, benefiting from organic upstream growth.