This, coupled with below-historical-average inventory levels in major importers such as China, India and Bangladesh means that demand should come back more significantly in the short-term, the analysts point out.
That said, El Niño is still at the ‘alert stage’ and ‘advisory stage’ respectively, according to the Australian Bureau of Meteorology and US National Oceanic Atmospheric Association respectively.
“While El Niño conditions are now present, we highlight that it needs to remain at these levels for three to four consecutive months before it is confirmed. We still believe the El Niño needs to be a strong one for CPO prices to move by more than 20%, which would have a more significant impact on planters’ earnings. In terms of impact to productivity, we only expect this to be seen in 2024,” the analysts add.
RHB’s CPO price assumption of RM3,900 per tonne for 2023 remains unchanged.
The analysts have “buy” calls on Wilmar International and Golden Agri-Resources with target prices of $4.40 and 31 cents respectively.
As at 12.11pm, shares in Wilmar and Golden Agri are trading at $3.71 and 24 cents respectively.
