PETALING JAYA: Kuala Lumpur Kepong Bhd

(KLK) is expected to face measured earnings performance in the quarters ahead as analysts weigh a supportive price environment for crude palm oil (CPO) against persistent downstream headwinds and associate losses.

While production growth and resilient prices underpin near-term optimism, margin compression in refining and exposure to weak overseas associates are seen as tempering overall upside, according to CIMB Research.

It noted that KLK expected palm oil prices to remain firm in the coming months, supported by “firm biodiesel demand from Indonesia, improved palm oil price competitiveness and tight global soybean supplies”.

The research house said refining margins are likely to stay compressed, with gradual recovery only in the oleochemical segment.

“We project KLK’s core net profit to soften in the fourth quarter ending Sept 30, 2025 (4Q25), weighed down by lower CPO and palm kernel prices as well as associate losses,” it added.

CIMB Research maintained its sum-of-parts-based target price of RM21.50 with a “hold” call on KLK, pointing out the counter lacked catalysts despite offering a 3.5% dividend yield.

TA Research also flagged commodity price swings, stating that KLK’s management expects palm oil prices to stay volatile in the second half of financial year 2025.

It said global soybean prices remained under pressure from ample supply out of South America but underscored that a robust demand from the biofuel industry is providing a key source of price support, mitigating some of the downside risk.

TA Research is keeping its “hold” call, raising its target price to RM21.21 from RM20.67.

BIMB Research struck a cautiously positive tone, saying: “We remain cautiously optimistic on KLK’s near-term outlook, with upstream earnings supported by higher production and favourable CPO prices, while costs are expected to moderate in 4Q25.”

However, it cautioned the downstream business would likely stay challenging due to competitive pricing and volatile feedstock costs.

The research house reiterated its “hold” call on KLK, with a target price of RM21.10.

Meanwhile, Maybank Investment Bank Research highlighted pressures from KLK’s associate Synthomer.

“For 4Q25, we expect KLK to deliver lower quarter-on-quarter profits as Synthomer continues to report losses.”

It expected KLK’s share of losses to amount to RM64mil, to be reflected in the upcoming quarter.

The research house raised its target price to RM20.40 from RM19.70, keeping a “hold” recommendation.

In contrast, Phillip Capital Research turned more upbeat, saying: “We raise our 2025 to 2027 earnings forecast by 13% to 17% after factoring in lower operating cost (estates) assumptions.”

It lifted its target price to RM22.62 from RM19.60 and reiterated a “buy” call, while cautioning that weaker CPO prices and cost pressures remain risks. KLK’s net profit surged 44.3% to RM346.6mil in 3Q25 from RM240.2mil a year earlier as revenue climbed 16.9% to RM6.43bil.

For the nine months, net profit rose 23.5% year-on-year to RM721.3mil on RM18.7bil in revenue.