RHB Research made no changes to IOI’s FY25 to FY26 forecast growth of 4% to 5%.
PETALING JAYA: IOI Corp Bhd
’s latest first-quarter results for financial year 2025 (1Q25) is a positive start to the group, say analysts.
RHB Research stated in a report the group’s upstream earnings are expected to improve going forward on the back of higher crude palm oil (CPO) prices, while downstream earnings will be supported by strong specialty fats contributions at the associate level.
IOI’s valuation also remains attractive at 17 times 2025 forecast price-to-earnings (PE), at the lower end of its peer range of 18 times to 22 times, it added.
The research house noted IOI’s fresh fruit bunch (FFB) output increased 3.5% year-on-year (y-o-y) in 1Q25.
“This is slightly lower than its guidance and our assumption of about 5% for financial year 2020 (FY25),” it said, adding that IOI is keeping to its 5% FFB growth forecast for FY25.
The research house made no changes to IOI’s FY25 to FY26 forecast growth of 4% to 5% as it expects improvement in the coming quarters as Indonesian output recovers.
RHB Research also kept its FY25 CPO price assumption unchanged at RM4,100 per tonne.
Meanwhile, IOI’s downstream margin, excluding associates, fell into negative territory, at 0.7% in 1Q25 from 0.7% in 1Q24 and 1.6% in 4Q24.
“While we expect the negative margin at its refinery segment to continue in 2Q25, given the rising CPO price environment, there could be some improvement from the change in Malaysia’s export tax structure from Nov 1, 2024. Once CPO prices stabilise, refining margin should follow suit,” RHB Research noted.
The group’s specialty fats associate’s profit jumped 42% quarter-on-quarter and rose 37% y-o-y in 1Q25.
RHB Research highlighted “going forward, this is expected to continue as IOI expects Bunge Loders Croklaan to post a record-high profit for the current financial year.” It has kept a “buy” call on IOI with an unchanged target price of RM4.90 a share, after updating IOI’s latest net debt position.
In a note to clients, CGS International (CGSI) Research said IOI’s 1Q25 core net profit came within its expectations, contributing 23% and 24% of both its and Bloomberg consensus FY25 estimates.
“We see stronger earnings for 2Q25 to 3Q25 earnings on the back of higher upstream contribution, thanks to higher CPO average selling price,” it added.
Note that the price of CPO has risen by 20% since early October 2024, hitting its two-year high of RM5,220 per tonne in mid-November 2024.
CGSI Research also expects CPO price to continue to trade in the range of RM4,300 to RM4,800 per tonne in 1Q25, which would still support IOI’s upstream performance for 2Q25 to 3Q25 forecasts, despite seasonally lower CPO production during the correspondent period.
Having said that, the research house believes IOI’s downstream operations remain challenging, especially in 2Q25 for its oleochemical sub-segment, given the higher raw material prices and sluggish demand despite lower freight and logistics costs.
