“Thus far, RHB notes that spot CPO prices have moderated from RM4,600–RM4,800 [$1,386–$1,446] per tonne in 1Q2025 to a low of RM3,780 in May, only to bounce back to RM3,900–RM4,100 currently. The decline was mainly driven by geopolitical factors, including US trade tariffs, wars and a decline in crude oil prices, all of which pushed CPO prices in the same direction.
“We highlight that the correlation between CPO prices and crude oil prices surged to 0.47 in April 2025 from –0.6 in 1Q2025, and subsequently rose further to the current levels of 0.68 due to more geopolitical risks.”
Looking ahead, RHB expects CPO prices to remain volatile given the ever-changing geopolitical situation. Fundamentally, however, global supply and demand are likely to be more balanced in 2026, as supply improves, while demand is expected to pick up given the more attractive relative prices, the firm believes.
Meanwhile, the supply of 17 oils and fats complex is expected to improve y-o-y in FY2026, driven by a partial recovery of palm, sunflower and rapeseed supplies, as well as continued growth from soybeans. Still, the stock-to-usage ratio of the 17 oils and fats complex is still expected to remain below the historical average of 13.6%, at 12.9% for October 2025/September 2026, albeit up from 12.7% in FY2025.
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“This leaves very little cushion in case of any short-term bullish supply or demand surprises, hence raising the risk of price volatility going forward,” according to RHB.
Ignoring the noises from geopolitics, RHB expects FY2026 to see muted soybean prices, due to continued strong supply in FY2026; soybean oil (SBO) prices to remain supported at higher levels, due to the higher demand from increased US biofuel blending; CPO prices to continue trading at a discount to SBO in the medium term (currently at US$217 [$278] per tonne discount); and demand returning from price-sensitive countries, such as India, Pakistan and Bangladesh.
Hence, RHB has trimmed CPO prices to RM4,100/tonne (from RM4,300) for 2025 and to RM4,000 (from RM4,100) for 2026 and 2027; however, it has raised PK prices to RM3,300/tonne for 2025 (from RM2,800) and to RM3,200 for 2026 and 2027 (from RM2,600). “We also update our latest in-house forex assumptions and adjust forecasts by 3.2%, –1.2% and –1.3% for FY2025–FY2027,” says RHB.
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RHB has four palm oil stocks under its coverage: First Resources, Bumitama Agri, Wilmar International and Golden Agri-Resources.
Out of the four, First Resources is the only one with a “buy” call, as the research house has kept its rating, while reducing the target price to $1.70 from $1.85 previously.
“We expect the full impact of the consolidation of Austindo Nusantara Jaya (ANJ) to come in from 2HFY2025, providing a growth impetus for the group. The stock is currently trading at 8 times FY26F P/E, at the mid-end of its peer range of 6–11 times,” says the research team, which has also increased First Resources’ environmental, social and governance (ESG) score to 2.8 from 2.7 out of 4, driven by its improvement from the “E” pillar.
Bumitama Agri, on the other hand, was downgraded to “neutral” from “buy” with a lowered target price of 80 cents from 90 cents previously.
The way RHB sees it, valuation is fair at 8 times FY2026 P/E, within peers’ 6–11 times and close to its historical mean. The stock is also supported by a FY2026 dividend yield of 8%.
“We roll forward our valuation to FY2026 and lower our target P/E to 9 times FY2026 (from 10 times FY2025), after adjusting for its current historical average,” says RHB.
Meanwhile, Wilmar International and Golden Agri-Resources have their “neutral” calls unchanged, with both their target prices lowered.
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Wilmar’s target price dropped to $2.80 from $3.00, with RHB being cautious of the group’s legal overhang, causing uncertainties. “With the corruption case hanging over its head, along with tariff uncertainties, volatile raw material prices and economic uncertainties, Wilmar International’s valuation could remain lower than that of its China-listed peers until earnings undergo a significant turnaround,” says the research team.
Golden Agri-Resources’ target price declined to 25 cents from 26 cents and RHB expects a “more balanced year ahead”.
“Golden Agri-Resources is fairly valued, trading at 9 times FY2026, at the high end of its peer range of 6–11 times FY2026 P/E,” says RHB.
