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KUALA LUMPUR, May 11 (Bernama) -- MIDF Research has maintained its 'positive' rating on the plantation sector, with a crude palm oil (CPO) target price of RM4,300 per tonne for 2022.
It believes that the CPO price will remain at elevated levels throughout the year, supported by higher prices of edibles oils on the back of supply concerns amid the Russia-Ukraine war.
"In the immediate term, we believe palm oil exports for upcoming months would be moderated by the impact of lockdown in China, as well as slower post-festivities as replenishment normalise.
"Nonetheless, following Indonesia’s widened export ban, we reckon there would be a shift in the demand towards Malaysia, given 45 per cent of India’s palm oil imports came from Indonesia," it said in a research note.
Production is expected to receive further boosts in the second half of 2022 (2H22) as the Ministry of Plantation Industries and Commodities is in the midst of preparing special procedures to speed up the process to recruit 32,000 foreign workers to meet labour shortage.
MIDF Research expects the stockpiles of Malaysia’s palm oil to see a gradual increase in the second quarter and peak in the third quarter following the typical higher trend of fresh fruit bunches (FFB) production month.
Echoing the same sentiment, PublicInvest Research maintains its 'overweight' call on the plantation sector as Malaysia’s palm oil inventory registered its first gains in six months, up 11.5 per cent to 1.64 million tonnes.
Meanwhile, Kenanga Research said a downward pressure on palm oil prices is expected to weigh in over the coming months as fruiting picks up seasonally.
"However, the downside to palm oil prices could be limited due to supply tightness in the global edible oils and fats market worldwide, output of palm oil and soybean oil (SBO) should improve in 2H22 albeit by not much the improvement can best be described as preventing the tight situation from deteriorating further rather than lifting supply significantly," it said.
Besides, the research firm said the palm oil prices also will be shaped by China’s inventory, which is believed to be low while the economy has yet to fully restart, as well as firm hydrocarbon oil prices will encourage biodiesel usage if vegetable oil prices weaken sufficiently.
“Palm oil prices should stay firm for CY2022 and probably into CY2023 as well. Our current CPO price assumptions for CY22 and CY23 remain at RM4,000 and RM3,500 per tonne but we are upgrading on a case-by-case to RM4,500 for CY22 and RM4,000 for CY23," Kenanga Research said.
Meanwhile, CGS-CIMB Securities Sdn Bhd believes that the CPO prices could trade in the range of RM5,500 to RM7,000 per tonne in May 2022 due to the uncertain export supplies of sunflower oil from Ukraine and reduced palm oil export supplies from Indonesia.
"We believe Indonesia could lift its temporary palm oil export ban in June 2022 if the bulk cooking oil price in the country falls to Rp14,000 per litre.
"We now expect CPO prices to remain firm in the first half of 2022, averaging RM6,138 per tonne before trending lower to average RM5,062 per tonne in 2H22 when palm oil supplies recover," it said.
As such, CGS-CIMB keeps its 'neutral' call rating on the plantation sector as there is near-term upside to earnings while valuations remain undemanding at current levels.
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