CIMB Investment Bank Bhd (CIMB Securities) and Hong Leong Investment Bank Bhd (HLIB) have both maintained their OVERWEIGHT calls on the plantation sector, supported by expectations of firm crude palm oil (CPO) prices and a likely peak in palm oil inventories.

CIMB Securities said Malaysia’s palm oil stocks rose 7% month-on-month and 17% year-on-year to 2.36 million tonnes in September 2025, marking a 22-month high. The figure was in line with CIMB’s forecast of 2.34 million tonnes but exceeded consensus estimates of around 2.16 million tonnes.

The increase was largely attributed to a 33% month-on-month drop in domestic disappearance to 333,000 tonnes, which the analysts said could be linked to lower output of palm oil derived from empty fruit bunches and steriliser condensate, as well as reduced stocks in transit.

Palm oil output fell 0.7% month-on-month but rose 1% year-on-year to 1.84 million tonnes, while exports rebounded 7.7% to 1.43 million tonnes, driven by stronger demand from India, the Middle East and the US. Imports jumped 34% to 78,000 tonnes, likely reflecting higher supply from Indonesia.

CIMB Securities projects Malaysian palm oil stocks to rise slightly to 2.4 million tonnes in October, supported by a 5% increase in both production and exports as buyers restock ahead of the Deepavali season. It expects CPO prices to remain high within the RM4,000 to RM4,500 per tonne range for the rest of the year, underpinned by Indonesia’s plan to launch its B50 biodiesel mandate by mid-2026 and seasonally lower production between November 2025 and February 2026.

Following stronger-than-expected prices, CIMB has raised its CPO price forecasts by RM130 per tonne to RM4,330 for 2025F and by RM100 per tonne to RM4,200 for 2026F. The research house expects plantation earnings in the third quarter of 2025 to improve quarter-on-quarter on higher output and prices. Its top picks include SD Guthrie, IOI Corp, Ta Ann and Hap Seng Plantations.

Similarly, HLIB maintained an Overweight stance on the sector, expecting stock levels to have peaked in September. The 7.2% month-on-month rise in palm oil inventories to 2.36 million tonnes was the seventh consecutive increase and the highest since November 2023. However, the research house expects inventories to begin trending lower from October as production eases and exports strengthen, reinforcing the outlook for firm CPO prices in the near to medium term.

HLIB maintained its CPO price assumptions at RM4,300 per tonne for 2025 and RM4,200 per tonne for 2026, noting that year-to-date prices averaged RM4,347 per tonne. It highlighted potential upside risks from worse-than-expected La Niña conditions or a smooth rollout of Indonesia’s B50 mandate.

HLIB favours planters with strong Malaysian upstream exposure and minimal land risks. Its top picks are SD Guthrie with a target price of RM5.76 and Hap Seng Plantations at RM2.29, citing their healthy balance sheets, operational leverage and steady dividend yields.

Source: Business Today