Kuala lumpur: Higher palm product prices and seasonally stronger fresh fruit bunch (FFB) output are poised to enhance upstream earnings for most planters in the upcoming results season commencing November 5, particularly on a quarter-on-quarter basis, as reported by Hong Leong Investment Bank (HLIB).
According to BERNAMA News Agency, HLIB indicated that six out of the seven planters under its coverage experienced positive quarter-on-quarter output growth in the third quarter of 2025 (3Q2025), driven by the seasonal increase in cropping patterns. The investment bank noted that broadly higher FFB output, firmer palm product prices, and stable production costs are expected to contribute to sequential improvement in upstream earnings among planters.
However, HLIB pointed out that downstream performance is likely to remain subdued in 3Q2025 due to ongoing competition and refinery overcapacity in Indonesia, which continue to exert pressure on refining margins. Elevated feedstock costs and weak demand in the oleochemical sub-segment are also impacting performance.
Additionally, HLIB observed that five of the seven planters under its coverage registered modestly higher FFB output in 3Q2025. The bank highlighted that stronger FFB output and palm product prices, particularly palm kernel, along with lower crude palm oil (CPO) production costs due to reduced fertiliser prices, though partly offset by Malaysia’s higher minimum wage since February 2025, are likely to boost upstream earnings in 3Q2025.
HLIB has maintained its 2025 and 2026 CPO price assumptions at RM4,300 and RM4,200 per metric tonne, respectively, and retained its ‘overweight’ stance on the plantation sector. So far this year, the CPO price has averaged RM4,351 per metric tonne.
The bank expressed a preference for planters with greater exposure to Malaysian upstream operations, given their high leverage to CPO prices and minimal exposure to land confiscation risks. It also noted that key re-rating catalysts for CPO prices include worse-than-expected La Nina conditions, which could reduce palm and soybean output in South America, and the smooth implementation of the B50 biodiesel mandate in Indonesia.