• April CPO production rose 18.4% MoM to 1.63m tonnes, though exports fell 14.3% MoM and inventories rose to 2.31m tonnes, lifting STU to an elevated 1.45x.
• CPO prices average RM4,568/tonne in April, with near-term support from energy-biodiesel correlations and longer-term support from global biodiesel mandates.
• Biodiesel mandates continue to be a key demand catalyst with Malaysia’s B15 rollout incrementally supportive, while Indonesia’s B50 mandate could add 3.08m tonnes of CPO feedstock demand, although utilisation-adjusted capacity constraints may temper demand momentum going into CY27.
• Maintain Overweight and CY26/27 CPO average price forecast of RM 4,400.
April CPO production at 1.63m tonnes in line with seasonal trends. Total CPO production for April rose 18.4% MoM to 1.63m tonnes with a slight decline seen YoY (-3.4%). MoM, Peninsular Malaysia rose 138k tonnes followed by Sarawak at 62k tonnes and Sabah at 51k tonnes. We believe seasonal trends continue to influence MoM increases in FFB and thus CPO production. Relative to our CY26 CPO production forecast (20.7m), YTD output is at 28% of our expectations and we continue to expect an improving trend in production with peaks expected in Sept-Oct CY26.
Palm oil exports fell in April. Palm oil exports fell in April to 1.30m tonnes from March’s 1.52m tonnes (-14.3%). On a YoY basis, monthly exports had risen by 18%. Demand continues to be supported by the global demand for CPO including Indonesia’s B50 mandate which is expected to roll out on July 1, 2026. However, we note that moving into CY27, biodiesel production capacity constraints may influence momentum in export demand as highlighted below.
Inventories rise in April as production picks up. April palm oil closing stocks stood at 2.31m or a 1.7% increase from March’s 2.27m. YoY, inventories rose 23.8%. The stock-to-use ratio (STU) is estimated to be 1.45x, rising from March’s 1.25x, due to rising production levels. Considering a ten-year average of c.1.25x, the STU ratio remains elevated although we expect a pullback from this level within CY26 as export demand picks up owing to Indonesia’s higher blending mandate.
CPO prices average RM 4,568 in April. CPO prices in April had averaged higher to RM 4,568 from RM 4,321 (+5.7%) in March with a peak of RM 4,758 seen closer to the start of the month. In the near term, prices continue to be supported by the geopolitical conflict in the Middle East via the energy-biodiesel correlation channel and in the longer-term global biodiesel mandates are expected to lend support. Maintain CY26/27 average CPO forecast of RM4,400.
Malaysia biodiesel developments. The government has announced that 19 licensed plants will begin producing B15 biodiesel from June 1 this year, as part of efforts to reduce diesel prices across the country. The rollout was quoted to be implemented gradually with a potential advancement to B50 within the next two to three years. Separately, the Malaysia Biodiesel Association has stated that domestic biodiesel production capacity stands at 2.4m tonnes p.a. while actual biodiesel production for the national biodiesel blending programme was 1.0m tonnes in CY25. Based on back-of-theenvelope calculations, moving from B10 to B15 would represent an increase of 421k MT of CPO feedstock annually or 2% of CY25 CPO production. Additionally, a full year of B20 represents an increase of 795k MT or 4% of CY25 CPO production.Of note is the decision to roll out higher blends gradually rather than moving immediately to B50. Recall that in our previous sector report, we highlighted that the sustainability of higher biodiesel blends would depend partly on infrastructure investment and capacity readiness as well as the relative attractiveness of biodiesel versus petroleum diesel amid elevated diesel prices. While aggregate biodiesel production capacity appears sufficient to support blends up to B20, we believe the decision to roll out the mandate gradually is intended to avoid overcommitting to additional investments in production capacity, should the current energy crisis prove short-lived and lead to a normalization of diesel prices. Thus, we believe that the Malaysia biodiesel mandate likely represents a partial hedge against elevated diesel prices as opposed to a wide-scale replacement of petroleum diesel. Overall, these developments are somewhat supportive of CPO prices although support would likely become much more meaningful at higher blends.
Indonesia B50 to commence on July 1. The Indonesian government is set to roll out the B50 mandate starting July 1, 2026. According to Unggul Priyanto, member of the National Energy Council’s Technology Stakeholder Committee, biodiesel demand under B50 is estimated to be 19m kiloliters against a biodiesel production capacity of 22m kiloliters per annum. Under these assumptions, we estimate that the increase in CPO feedstock required would amount to 3.08m tonnes. We also highlight that at 19m kiloliters of demand and assuming a maximum utilisation rate of 85%, effective production capacity would fall short as the estimated demand would exceed theoretical maximum capacity of 18.7m kiloliters. Going into CY27, momentum for higher blends could fade if capacity is unable to catchup. Nevertheless, the increase to B50 is generally supportive for CPO prices.
Maintain Overweight stance. We continue to favour the plantation sector, supported by improving biodiesel-led CPO demand and the prospect of tighter stock levels as Indonesia and Malaysia move toward said blending mandates. In the near-term, geopolitical conflict continues to lend support for prices. Moving into CY27, we flag a potential capacity constraint that could temper export demand momentum despite the otherwise supportive biodiesel demand outlook.
Maintain BUY on SDG (TP: RM 7.01), HSPLANT (TP: RM 2.80), KLK (TP: RM 26.40). Meanwhile, we issue a HOLD call on SPLB given its proximity to our target price of RM3.81, although the TP is currently under review amid the ongoing earnings season.
Disclaimer
The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.
Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.
| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 3.919293 | 3.949945 |
| EUR | 4.620136 | 4.623855 |
| CNY | 0.579017 | 0.579473 |
| HKD | 0.500825 | 0.504229 |
| SGD | 3.080249 | 3.101294 |