Earnings outlook for IOI Corp remains cautious

PETALING JAYA: IOI Corp Bhd’s earnings outlook remains cautious given factors like a potential increase in soybean oil trades, and extreme weather as well as trade policy shifts that may affect future crude palm oil (CPO) price stability.

Looking into 2026, TA Research took a cautious view on CPO prices as ample South American soybean supply and US-China trade resumption could increase soybean oil trades, potentially limiting CPO demand.

“Strong biofuel demand could provide some support, but extreme weather and trade policy shifts may affect future price stability,” the research house said in a report yesterday.

It said IOI Corp’s first quarter of the financial year 2026 (1Q26) results were in line with expectations.

Stripping out foreign exchange effects and other non-core items, the core net profit increased 19.5% year-on-year (y-o-y) to RM362.3mil, supported by a 14.2% rise in revenue to RM3.1bil. Its upstream and downstream segments delivered stronger performances compared with the previous year.

Operating profit of the plantation segment rose 16.6% y-o-y in 1Q26 to RM350.6mil, driven by higher palm oil prices and a 2.3% y-o-y increase in fresh fruit bunch (FFB) output. CPO prices grew 2.7% y-o-y to RM4,169 per tonne, while palm kernel prices jumped 30.8% y-o-y to RM3,529 per tonne.

The manufacturing segment posted an operating profit of RM83.6mil in 1Q26, reversing a loss of RM17.3mil in the previous year. The improvement was primarily driven by stronger contributions and better margins from the refinery and oleochemical sub-segments.

“Management anticipates FY26 FFB production to increase as a larger portion of palms reach maturity, supported by estate mechanisation and digitalisation, which should strengthen the plantation segment.

“Although the downstream segment has shown improvement, management expects refinery and commodity marketing margins to remain weak due to strong competition from Indonesian players. Despite better performance, the oleochemical sub-segment would likely face challenges from soft demand, geopolitical risks, and regulatory uncertainties,” TA Research said.

It maintained its “sell” call for IOI Corp with a higher target price of RM3.97 per share from RM3.53.

The research house said the revision reflected expected improvement in the downstream division and potential near-term support for palm oil prices from low production and possible La Nina-related disruptions to harvesting activities.

“However, we believe the share price has run ahead of its underlying fundamentals with a negative risk-adjusted return,” TA Research said.