CPO production recovery ahead: We estimate CPO production to rebound after being impacted by El Niño in 2024. Elevated CPO prices in 1QCY25: The implementation of biodiesel mandates in Indonesia is set to boost CPO consumption, maintaining inventory levels.
Neutral sector rating maintained: Valuations reflect the current CPO price surge. Top picks: Kim Loong Resources (KIML) and Hap Seng Plantations (HAPL).
Lower CPO Production in December
CPO production in December 2024 dropped -8.3% MoM, continuing a low production cycle in Q4 2024. December’s production stood at 1.5m tonnes, bringing total CY24 production to 19.3m tonnes (+4.2% YoY). For CY25, production is forecasted to grow moderately by +1.3% to 19.5m tonnes, as recovery follows El Niño disruptions.
Palm Oil Export Trends
Palm oil exports declined -10.0% MoM in December 2024, following a -14.6% drop in November. Exports for CY24 reached 16.2m tonnes, down -4.3% YoY due to higher substitute edible oil supply, softer demand from China and India, and adverse weather. Surveyor data showed a -9.8% drop in early December shipments, attributed to the Northern Hemisphere winter season.
Lower Palm Oil Inventory
End-December 2024 palm oil inventory stood at 1.7m tonnes, a -5.4% MoM decline due to the low production cycle. Inventory is expected to decrease further in early 2025, driven by seasonal demand and lower production.
Flattish CPO Prices in December
Average CPO prices remained stable in December 2024 despite supply concerns, as weaker winter demand offset the positive outlook. CY24 CPO prices averaged RM4,213/mt (+10.0% YoY), supported by tight supply and biodiesel demand in Indonesia.
CPO Price Outlook for CY25 – RM4,300/mt
While CPO prices surged in 2024, the CY25 average is projected at RM4,300/mt, driven by supply recovery from Q2 CY25 onward. However, elevated prices are expected to persist in Q1 CY25 due to Indonesia’s biodiesel mandates.
Neutral Stance Maintained
“We remain Neutral on the plantation sector, as sustained CPO prices above RM5,000/mt seem unlikely. Key recommendations,” says Apex Research.
• HOLD: Kuala Lumpur Kepong (FV: RM21.60), United Plantation Bhd (FV: RM28.40), Sime Darby Guthrie (FV: RM4.50).
• BUY: Kim Loong Resources (FV: RM2.80), Hap Seng Plantations (FV: RM2.20).
• HOLD: Sarawak Plantations (FV: RM2.50).
Source:: Apex Research
Elevated CPO Prices
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