PETALING JAYA: IOI Corp Bhd

’s earnings will likely normalise in the upcoming quarter tracking the softer crude palm oil (CPO) price trend, say analysts.

The group’s third quarter results of financial year 2025 (3Q25) were anchored by its upstream division, which contributed over 90% of total group operating profit for FY25–FY27.

MIDF Research, in a report, said “any upward movement in the CPO price trajectory is expected to have a materially positive impact on the company’s earnings and, by extension, its share price performance.”

It noted the group’s upstream margins remained resilient at above 30%, underpinned by a relatively low cost of production compared with its peers estimated at about RM1,900 to RM2,100 per tonne.

“We are maintaining our earnings estimate on IOI at this juncture, as we deem the group’s 3Q25’s core profit after tax and minority interest of RM279.1mil – down 24.5% quarter-on-quarter (q-o-q), up 14% year-on-year – was within expectations,” said MIDF Research.

The research house has also kept a “buy” call on the stock with an unchanged target price of RM4.42 per share.

Meanwhile, CIMB Research expected IOI to report stronger q-o-q earnings in 4Q25, supported by higher production and improved downstream performance.

“We maintain our ‘buy’ call, as we believe IOI’s earnings have likely bottomed out in FY24 and are poised to recover in FY25–FY26, underpinned by higher CPO prices and improving downstream performance,” it pointed out

In addition, the research house favoured IOI for its lower exposure to Indonesia’s regulatory risks compared with its large-cap peers

“IOI’s low net gearing of 13.8% suggests that it may have a greater appetite for mergers and acquisitions relative to its large-cap plantation peers,” CIMB Research noted.

It said IOI expects CPO prices to range between RM3,700 per tonne and RM4,000 per tonne until end-June.

This indicated that fresh fruit bunch output is expected to recover significantly q-o-q in 4Q25, which should offset the impact of lower CPO prices, said CIMB Research.

The group has also guided that refining margins might come under pressure following the recent increase in Indonesia’s CPO levy, while oleochemical operations are expected to remain challenging due to weaker global demand and higher palm kernel prices.

However, its associate Bunge Loders Croklaan is expected to deliver strong results in 4Q25.

Kenanga Research has an “outperform” call on IOI at a target price of RM4.10 per share.

“We have toned down our FY25 core earnings per share by 5% to 20.6 sen on slightly softer-than-expected 3Q25 downstream results,” the research house said.

It liked IOI for its push to improve upstream productivity from planting with higher yielding materials to pro-active adoption of mechanisation and digitalisation.

The group also focused on higher margin specialty products downstream.

Its long-term sustainability efforts include investments to convert oil palm trunks into net zero palm-based wood products or empty fruit bunch into high value non-wood environmentally friendly pulp.

“Over FY25-FY26, firm upstream earnings are expected to overcome still muted downstream performance,” the research house added.

Looking ahead, TA Research said: “We anticipate the CPO prices to come under pressure due to abundant soybean harvests, particularly in Brazil, which could potentially be a record-breaking soybean harvest in the 2025-2026 season.”

In addition, it is important to closely monitor the trade tariff situation between China and the United States.

“Any major changes in tariff policies could significantly influence global soybean prices, which in turn would have a direct impact on the price competitiveness and demand for CPO,” it noted.

TA Research has revised IOI’s target price to RM3.74 after rolling forward its valuation base year to 2026.

Given the limited upside potential, the research house had downgraded the stock to a “sell” from a “buy” previously.