Hap Seng Plantations Holdings Bhd - Higher CPO prices and improving production to brighten outlook
Tue, 26-May-2026 07:08 am
by Research Team • Apex Research

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HSPLANT (5138)

Target Price (RM)

2.80

Recommendation

Buy

  • HAPL’s 1QFY26 CNP declined (-0.8% YoY, -34.3% QoQ) to RM35.1m, broadly in line with our expectations, representing 20% and 21% of our and consensus forecasts, respectively.

  • YTD production positive with FFB, CPO, and PK production rising 11.4%, 14.2%, 18.2% YoY respectively.

  • Higher CPO prices and improving seasonal FFB production to support topline, offset operating costs

  • Re-iterate our BUY recommendation with unchanged target price of RM2.80, based on 12.5x P/E multiple pegged to FY27F EPS.

Results inline with expectations. 1QFY26 CNP arrived at RM35.1m, representing 20% and 21% of our and consensus estimates respectively. CNP was derived after the following adjustments:

  • Gain on FV of money market deposits: -RM4.402m

  • Net loss in FV adjustments of biological assets: RM29.55m 

 

Of note was a one-time prospective adjustment due to accounting estimates arising from the revision of key assumptions used in the valuation of biological assets. The valuation methodology changed from including FFB up to two months from harvest to only within two weeks, causing a one-off RM25.87m operating loss. Excluding this one-off adjustment, profit before tax for the current quarter and year-to-date would have been RM42.316 million, representing a 42% increase from the corresponding quarter/period in the previous year.

 

YoY. For 1QFY26, CNP marginally declined 0.8% YoY to RM35.1m while CNP margin narrowed to 18.2% from 19.7% a year ago. Revenue rose 7% YoY, but margins narrowed due to higher unit production costs and lower ASPs despite higher sales volume.

 

QoQ. CNP fell 34.3% QoQ to RM 35.1m from RM53.4m while CNP margin fell to 18.2% from 27.1%. The declines in both CNP and margins were attributed to higher unit production costs and lower PK sales overriding the increase in CPO sales volume. 

 

Operational Highlights. YTD production was positive with FFB, CPO, and PK production rising YoY. On a YoY and QoQ basis, CPO sales volume increased 23%/3%. Meanwhile, PK sales volume rose 16.2% YoY but fell 13.2% QoQ.

 

Outlook. Higher expected CPO prices of RM4,400 and YoY improvements in FFB production lead us to be optimistic on the Group’s topline performance for FY26/FY27. Although increases in diesel costs could weigh on performance, we believe that increases in operating costs should be offset by expected increases in CPO and PK sales volumes owing to seasonal FFB production improvements in addition to elevated CPO prices.

 

Valuation. We believe Hap Seng Plantations to be a BUY with target price of RM2.80, by pegging 12.5x P/E multiple to FY27F EPS and 0% ESG factored premium/discount based on three-star ESG rating.

 

Risk. EU export ban and regulations, changing weather patterns affect FFB production, taxation and export ban in Indonesia threatens local CPO demand, shortage of labours and rising operational cost, increased competition from alternative vegetable oils

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