• SDG’s 1QFY26 CNP declined marginally 0.4% YoY to RM548m which had met our andconsensus expectations, accounting for 26.3%/24.7% respectively.
• YoY 1QFY26 Upstream EBIT declined 29.7% on softer productivity across all three regions.Downstream EBIT increased 39.5% on higher demand and margins. Industrial DevelopmentEBIT increased RM160m vs prior year corresponding quarter of no sale.
• Based on USD100/bbl, management has issued a guidance of RM 2,600 – RM 2,700 for CPOunit costs. Fertiliser costs remain contained with supply already secured for Indonesia withM’sia and PnG/SI 2HFY26 supply on the way.
• We maintain our BUY call with a higher target price of RM7.01 pegged to a 19.8x P/E multipleto FY27F EPS and 0% ESG factored premium/discount based on three-star ESG rating.
Results met expectations. Adjusting for (i) RM22m FV losses on commodities futures contracts and forward forex contracts, (ii) RM21m disposal gains, (iii) RM3m reversal of impairment, (iv) RM24m unrealised forex gains, and (v) RM14m net write-off/write-backs, 1QFY26 CNP arrived at RM548m and met our and consensus expectations at 26.3%/24.7% respectively.
YoY. 1QFY26 CNP decline marginally 0.4% YoY (1QFY25: RM550m) due to mixed performance arising from a weaker Upstream EBIT performance (-29.7%) which was offset by higher Downstream EBIT (+39.5%) and Industrial Development EBIT (>+100%). Lower average CPO prices (-10%) and weaker seasonal FFB production (-5%) had caused the YoY decline in Upstream. Higher Downstream EBIT contributions arose (+39.5%) primarily from Trading and Bulk thanks to better margins and sales volume which was supported by a recovery in the Asia Pacific Bulk and European operations while Industrial Development saw RM160m gain from third-party sales vs the prior year corresponding quarter of no sale.
QoQ. CNP in 1QFY26 had risen 17.1% due to PBT gains from Industrial Development. As a whole, Upstream EBIT (-6.7%) was weaker with seasonally softer Group FFB production (-16%), lower Group Palm Kernel prices (-4%) and marginally lower CPO prices (-1%). Downstream PBIT declined 17.2% due to softer margins which was partially offset by improved demand and higher JV results.
Operational Highlights YoY. 1QFY26 FFB production for the Group had fallen to 1.91m MT (-5%), total CPO output for the Group fell to 498k MT (-2%), and CPO OER is at 21.38% (1QFY25: 21.17%)
Indonesia had softer productivity with FFB production falling to 505k MT (-10%), CPO output dropping to 136k MT (-6%) in addition to a marginally higher CPO OER of 21.13% (1QFY25: 20.99%).
Malaysia productivity saw marginally softer FFB production falling to 955km MT (-2%) although CPO output rose to 235k MT (+7%), and a higher CPO OER of 21.39% (1QFY25: 20.32%).
PNG/SI productivity declined with FFB production falling to 450k MT (-5%), CPO output falling to 127k (-11%), and a lower CPO OER of 21.63% (1QFY25: 22.84%).As at 31 March 2026, total planted hectares were at 557k ha of oil palm (FY24: 567k) with mature hectares at c.457k or 83% (FY24: 476k). Average ages (years) were 12.2, 11.6, and 13.4 for Malaysia, Indonesia, and PNG/SI respectively.Based on USD100/bbl, management has issued a guidance of RM 2,600 – RM 2,700 for CPO unit costs owing to increased diesel costs which has impacted 5% of operating costs. Fertiliser costs remain contained with supply already secured for Indonesia while renegotiated prices are not expected to be a risk with suppliers for M’sia and PnG/SI whose 2HFY26 supply are on the way.
Industrial Development. The Group’s joint development with PDT & EcoWorld in Kulai, Johor has its Sale & Purchase agreement on track for completion within 1HFY26. Furthermore, c.300 acres in Negeri Sembilan have secured Estate Land Board approval in April 2026. Overall, management believes that Industrial Development is on track to achieving their PATAMI target of RM500m to 700m for FY26.
Outlook. Post a seasonally weaker 1QFY26, revenue should be supported by higher expected CPO prices for FY26/27 and as FFB production normalizes throughout the year. This is also in addition to the likelihood of meeting the Group’s Industrial Development PATAMI target alongside expected improvements in Downstream.
Earnings Revision. We note that in addition to previously raising our CPO price assumption to an average of RM4,400 for CY26/27, we had also taken into account the higher Downstream performance expectations for Trading & Bulk, higher productivity for Upstream, and higher cost guidance. We revise our FY26F/27F earnings forecasts marginally upwards owing to housekeeping following the release of the Annual Report 2025.
Valuation. We retain our BUY call with a higher revised target price of RM7.01 (previous RM6.96) based on a P/E of 19.8x on FY27F EPS and 0% ESG factored premium/discount based on a threestar ESG rating.
Risk. EU export ban and regulations, changing weather patterns affecting FFB production, taxation and export ban in Indonesia threatening local CPO demand, frequent labour turnover and rising operational cost.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 3.905324 | 3.936906 |
| EUR | 4.612086 | 4.616980 |
| CNY | 0.576264 | 0.576882 |
| HKD | 0.499073 | 0.502597 |
| SGD | 3.081991 | 3.103819 |