KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) has maintained its RM4,000 per tonne estimates for crude palm oil (CPO) for 2024 and a neutral stance on the sector.
This follows a mixed bag of results in the just-ended quarterly reporting season.
Two-out of seven companies under HLIB's coverage posted weaker-than-expected results mainly from lower-than-expected fresh fruit bunches production (FFB) and weaker downstream earnings (arising mainly from weaker margins at refining and oleochemical sub-segments).
The two companies were Kuala Lumpur Kepong Bhd (KLK) and Sime Darby Plantation Bhd.
"Out of the seven planters under our coverage, two came in within expectation, three beat expectation, while KLK and Sime Darby Plantation missed expectation.
"Compared against the preceding quarter (3Q23), there was a reduction in results misses, alongside more that surprised on the upside," it said in a note.
Meanwhile, HLIB said most players are of the view that CPO price will likely hover around RM3,700-4,000 per tonne in 2024.
Most planters expect CPO production cost to trend down in 2024, on the back of higher productivity and lower fertiliser prices.
"Most integrated players shared that prospects for the downstream segment will likely subdued in the near term, due to overcapacity of refineries in Indonesia, weak global economy (amid high inventory levels held by customers), and geopolitical tensions."
The firm also maintained its 2025 CPO price assumption of RM3,800 per tonne.
"For exposure, our top picks are IOI Corp Bhd and Hap Sep Plantations Holdings Bhd," it added.
