KUALA LUMPUR (Feb 26): TA Securities downgraded its recommendation on IOI Corporation Bhd (KL:IOICORP) as it anticipates limited upside on the stock amid competitive pricing and potential tariffs.

The research house said in a note on Wednesday that while IOI is expected to benefit from strong crude palm oil (CPO) prices, its downstream performance may be affected by competition and tariffs.

TA Securities downgraded IOI Corp to a "hold" call, with an unchanged target price of RM4.17, based on calendar year 2025 price-earnings ratio of 18 times, with a potential upside of less than 12%.

In the upstream segment, management forecast the CPO price will stay over RM4,200 per tonne for the next three months, driven by seasonal low production, increased demand of Ramadan and the implementation of Indonesia's B40 biodiesel, said the research house.

However, CPO price may face some downward pressure because of competitive pricing from alternative edible oils, it added.

Management also expected a strong recovery in harvested fresh fruit bunches production in the fourth quarter ending June 30, 2025 (4QFY2025) compared to 3QFY2025, thanks to better weather conditions and trees coming out of the low production season, the research house said.

For the downstream segment, TA Securities also expected that cost optimisation in the refining and commodity marketing sub-segment remains a priority even though competitive pricing from Indonesia may pressure the segment margin.

The group's oleochemical sub-segment is expected to be affected by US tariffs and global trade disruptions, the research house added.

Its associate, Bunge Loders Croklaan, is anticipated to maintain a strong product margin despite the potential US tariffs that will affect the import of raw materials.

At the time of writing, shares of IOI Corp were down four sen or 1% at RM3.78, giving the group a market capitalisation of RM23.8 billion. The counter is down 2.33% this year.