KUALA LUMPUR (Sept 12): Hong Leong Investment Bank (HLIB) Research has kept its “neutral” rating for the plantation sector, and retained its crude palm oil (CPO) price assumption of RM4,000 per metric ton for 2023.
It expects the arrival of El Nino, and potentially stronger near-term demand — arising from India’s more active restocking activities ahead of the Diwali festival in mid-November, and palm’s improved price competitiveness against fossil fuel — to lend support to CPO prices.
In a sector update on Tuesday, the research house said that moving into 2024, it is maintaining its projected CPO price of RM3,800 per metric ton, based on the assumptions that the El Nino will turn out to be a moderate one, and that it will dissipate at end-2023.
“We maintain our 'neutral' stance on the sector, given the absence of a notable demand catalyst.
“For exposure, our top pick is IOI Corp Bhd (with a 'buy' call, and a target price of RM4.66), given its commendable valuations,” it said.
HLIB said that moving into September, stockpiles will likely remain flattish, as seasonally higher cropping patterns will likely be offset by potentially stronger near-term demand for palm oil.