11 April 2023

Data Release: Mar 2023 MPOB Stats

HLIB Research
PP 9484/12/2012 (031413) Plantation
Chye Wen Fei
wfchye@hlib.hongleong.com.my 9-month-low stockpile
(603) 2083 1712
Palm oil stockpile remained on downtrend, falling by -21.1% MoM to 1.67m

NEUTRAL
tonnes in Mar-23, due mainly to sharply higher exports (+31.8% MoM). We
(Maintain) believe stockpile will remain low in the near term, on the back of (i) seasonally
lower production (arising from Ramadhan month); and (ii) Indonesia’s restrictive
KL Plantation Index export policy and higher biodiesel admixture, which will likely support palm oil
shipment from Malaysia. Maintain 2023-24 CPO price assumptions of
Pts Pts
9,000 1,650 RM4,000/mt and RM3,800/mt, and Neutral rating on the sector (given the absence
of notable earnings growth catalyst). For exposure, our top picks are KLK (BUY;
8,400 1,590
TP: RM26.27) and IOI (BUY; TP: RM4.36).
7,800 1,530
DATA HIGHLIGHTS
7,200 1,470

6,600 1,410 Lowest stockpile in 9 months. Palm oil stockpile remained on downtrend, falling by
KLPLN (LHS) KLCI (RHS)

-21.1% MoM to 1.67m tonnes in Mar-23, due mainly to sharply higher exports (+31.8%
6,000 1,350
Jan-00 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23
MoM). The stockpile came in lower than Bloomberg survey’s estimate of 1.75m tonnes,
mainly due to higher-than-expected exports.
Stock Rating
Rating Price Target
Marginal increase in palm oil output. Despite seasonality, output only rose
CBIP SELL 1.08 0.94 marginally (by 2.8% MoM) to 1.29m tonnes in Mar-23, as seasonality was partly
FGV HOLD 1.47 1.54 weighed down by heavy rainfall in Peninsular region (which dragged output
Genting Plt. HOLD 6.00 6.51 contribution in the region by -1.4% MoM).
Hap Seng Plt. BUY 1.76 2.09
IOI Corp BUY 3.80 4.36 Cumulatively, palm oil production increased by 3.2% to 3.92m tonnes in 1Q23, helped
KLK BUY 21.46 26.27
Sime Plt. HOLD 4.31 4.49 by higher output during the first 2 months of 2023 arising from easing labour shortage,
TSH HOLD 1.04 1.12 we believe.

Strong recovery in exports. Exports recovered significantly (by 31.8% MoM) to

1.49m tonnes in Mar-23, benefitted from Indonesia’s moves to curb palm oil exports
ahead of Ramadhan festival and raise biodiesel mandate. Cargo surveyor Intertek
Testing Services indicated an increase in palm oil shipments to India, China, EU, and
Africa. Cumulatively, exports rose 5.7% to 3.75m tonnes in 1Q23, boosted mainly by
higher exports to China, India and EU region, particularly during Mar-23.

Exports during first 10 days of Apr-22. Preliminary data from independent cargo
surveyor Amspec indicated that palm oil shipments from Malaysia plunged by 29%
MoM to 337k tonnes during the first 10 days of Apr-22.

HLIB’s VIEW

Stockpile to remain low in the near term. We believe stockpile will remain low in the
near term, on the back of (i) seasonally lower production (arising from Ramadhan
month); and (ii) Indonesia’s restrictive export policy and higher biodiesel admixture,
which will likely support palm oil shipment from Malaysia.

Forecast. YTD, CPO price averaged at RM4,037/tonne, we believe CPO price will
likely remain well supported at above RM4,000/mt in the near-term, supported by weak
near term production outlook, coupled with Indonesia’s biodiesel mandate and near -
term restrictive export policies. For now, we hold the view that CPO price will weaken
once Indonesia relaxes on its Domestic Market Obligation (DMO) policy. Maintain
2023-24 CPO price assumptions of RM4,000/mt and RM3,800/mt, respectively.

Maintain NEUTRAL. We maintain our Neutral stance on the sector, given the absence
of notable earnings growth catalyst. For exposure, we still favour integrated players
such as KLK (BUY; TP: RM26.27) and IOI (BUY; TP: RM4.36).

1 HLIB Research l www.hlebroking.com

Plantation l Data Release: Mar 2023 MPOB Stats
Figure #1 Monthly Data
Mar-22 Feb-23 Mar-23 MoM YoY YTD 2022 YTD 2023 YoY
000 tonnes 000 tonnes 000 tonnes % % 000 tonnes 000 tonnes %
Opening stocks 1,518.2 2,268.2 2,119.8 -6.5 39.6 1,614.6 2,196.6 36.0
Imports 84.9 52.5 39.8 -24.3 -53.1 305.3 237.2 -22.3
Production 1,411.2 1,253.7 1,288.4 2.8 -8.7 3,802.3 3,922.4 3.2
- Pen. Malaysia 818.5 679.0 669.3 -1.4 -18.2 2,091.8 2,059.5 -1.5
- East Malaysia 592.8 574.6 619.0 7.7 4.4 1,710.5 1,863.0 8.9
Exports 1,281.7 1,128.0 1,486.2 31.8 16.0 3,549.9 3,751.2 5.7
- CPO 335.3 297.8 240.8 -19.1 -28.2 403.0 567.2 40.8
- PPO 946.5 830.2 1,245.5 50.0 31.6 1,865.2 1,697.7 -9.0
Domestic Use 259.7 326.6 288.7 -11.6 11.1 699.4 932.0 33.3
Ending stocks 1,472.8 2,119.8 1,673.0 -21.1 13.6 1,472.8 1,673.0 13.6
MPOB; HLIB Research

Figure #2 Monthly Output & End Inventory

Production Closing Stock

3,500

3,000
'000 tonnes

2,500

2,000

1,500

1,000
Jul-15
Jul-13

Jul-14

Jul-16

Jul-17

Jul-18

Jul-19

Jul-20

Jul-21

Jul-22
Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Jan-22

Jan-23
Jan-21
Apr-13

Oct-13

Apr-14

Oct-14

Apr-15

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

Apr-18

Oct-18

Apr-19

Oct-19

Apr-20

Oct-20

Apr-21

Oct-21

Apr-22

Oct-22
MPOB; HLIB Research

Figure #3 Vegetable oil inventory levels in China and India

China India
3,000 2,000
1,800
2,500 1,600
1,400
2,000
'000 tonnes
'000 tonnes

1,200
1,500 1,000
800
1,000 600
400
500 200
0
0
Jan-19

Jan-20

Jan-21

Jan-22

Jan-23
Apr-19
Jul-19
Oct-19

Jul-20
Oct-20

Apr-21
Jul-21
Oct-21

Apr-22
Apr-20

Jul-22
Oct-22
Jan-20

Jan-21

Jan-23
Jan-19

Jan-22
Apr-19
Jul-19
Oct-19

Apr-20
Jul-20
Oct-20

Jul-21
Oct-21

Apr-22
Jul-22
Oct-22
Apr-21

Palm oil Soybean oil Sunflower oil Rapeseed oil Palm oil Soybean oil Sunflower oil Rapeseed oil Other oils

MPOC

2 HLIB Research l www.hlebroking.com

Plantation l Data Release: Mar 2023 MPOB Stats
Figure #4 Peer comparison
Mkt Cap Price Target Rating FYE P/E (x) P/B (x) Yield (%)
(RM m) (RM) (RM) FY22 FY23 FY22 FY23 FY22 FY23
CBIP 533 1.08 0.94 SELL Dec 15.7 7.7 0.6 0.6 3.7 1.9
FGV Holdings 5,363 1.47 1.54 HOLD Dec 4.2 7.7 0.8 0.7 5.4 2.7
Genting Plts. 5,384 6.00 6.51 HOLD Dec 10.0 14.4 0.9 0.9 2.0 2.0
Hap Seng Plts 1,408 1.76 2.09 BUY Dec 6.4 9.9 0.7 0.7 6.8 6.3
IOI Corp 23,879 3.80 4.36 BUY Jun 12.2 14.8 2.0 1.9 3.7 2.8
KLK 22,898 21.46 26.27 BUY Sep 9.8 12.6 1.5 1.5 5.1 4.4
S. Darby Plt 29,670 4.31 4.49 HOLD Dec 12.8 17.5 1.7 1.6 2.8 2.8
TSH Res 1,436 1.04 1.12 HOLD Dec 7.1 13.2 0.8 0.7 1.4 1.4
HLIB Research

3 HLIB Research l www.hlebroking.com

Hong Leong Investment Bank Berhad (10209-W)

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4 HLIB Research l www.hlebroking.com