Production recovery bolsters Hap Seng Plantations' 2026 prospects

PETALING JAYA: Hap Seng Plantations Holdings Bhd is heading into 2026 with expectations of steadier crude palm oil (CPO) pricing and improving output, even as research houses flag lingering volatility and cost pressures that could cap near-term earnings momentum.

According to Phillip Capital Research, while prices are expected to hold above RM4,000 per tonne, prevailing volatility and cost pressures may still constrain margins. 

Citing Malaysian Palm Oil Board (MPOB) data, the brokerage observed that fourth-quarter (4Q) 2025 average CPO prices strengthened to RM4,840 per tonne, with November–December levels climbing above RM5,000 per tonne. It added that current local delivery prices are trading between RM4,092 and RM4,140 per tonne in November, even as the outlook remains uncertain amid intensifying demand competition and ongoing geopolitical risks.

Phillip Capital Research also warned that weaker free fresh fruit bunches (FFB) and CPO production could weigh on results, highlighting wetter-than-usual weather, seasonal factors and softer demand. 

“We keep our earnings forecasts but caution on possible downside risks stemming from weaker FFB and CPO production due to wet weather conditions, seasonal yield trends, and softening demand amid reduced competitiveness of palm oil versus substitute oils,” it explained.

The brokerage maintained a 12-month target price of RM1.80 for Hap Seng Plantations, based on 11 times forward earnings, and lowered its call to “sell”, saying the stock’s recent gains “has largely priced in positives”.

CIMB Research, however, retained a more upbeat stance. 

It kept its “buy” rating and sum-of-parts-based target price of RM2.45 per share, underpinned by a valuation of RM40,000 enterprise value per hectare (EV/ha). It also expects the company's 4Q25 results to rebound. 

“We expect stronger 4Q25 earnings, supported by a 16% month-on-month (m-o-m) rise in October production to 63,784 tonnes (versus 3Q25 monthly average of 50,131 tonnes),” it noted. 

CIMB Research continues to favour the group for its undervalued estates — with implied EV/ha at RM32,000 — as well as a net cash position of RM646mil and forecast dividend yields of 4% to 5% for 2025 to 2027.

BIMB Research also maintained a constructive outlook, albeit tempered with caution. 

It said: “We remain cautiously optimistic on Hap Seng Plantations’s earnings growth prospect. 4Q25 earnings are expected to remain stable, backed by a recovery in production (Oct FFB output +16% m-o-m), favourable palm products prices and continued cost efficiency efforts.” 

The brokerage expects 2026 growth to be supported by a 3% year-on-year increase in production and relatively firm CPO prices. 

Since Hap Seng Plantations predominantly sells on spot, it stands to benefit from stable average selling prices (ASPs) and premiums from its Roundtable on Sustainable Palm Oil/International Sustainability and Carbon Certification-certified estates.

Reiterating its “buy” call, BIMB Research said raised its target price for Hap Seng Plantations to RM2.50 from RM2.40. The revised target price was derived from 0.9 times price-to-book-value applied to 2026 book value per share of RM2.77, following its valuation rollover. 

The brokerage cited Hap Seng Plantations’ healthy balance sheet and attractive 4.5% dividend yield for 2025 and 2026.

For context, Hap Seng Plantations recently reported a 5.51% decline in 3Q25 net profit to RM52.38mil due to lower sales volume, though higher palm product prices provided some cushion. Revenue fell 4.35% to RM169.55mil. For the nine-month period, net profit dropped 21% to RM94.52mil, mainly because of fair value losses on biological assets.