• KLK recorded 3QFY26 CNP of RM287.4m (-16.5% YoY and +3.8% QoQ), bringing 9MFY26 CNP to RM902.3m (-8.2% YoY) which missed our forecast at 61% but narrowly missing consensus at 69%.
• Higher CPO prices are expected to support KLK’s plantation earnings in 4QFY26 and 6MFY27, driven by El Niño-related supply constraints and stronger Indonesian biodiesel demand, though FFB yields are projected to decline by about 7% in 2Q–3QFY27.
• Manufacturing earnings should continue recovering, but higher CPO feedstock costs may pressure oleochemical margins and refining remains weak, while ongoing Synthomer losses are expected to remain a drag on overall earnings.
• Maintain BUY with a lower TP of RM23.80 (from RM25.47 previously), by pegging 18.5x P/E multiple to our revised lower FY27F EPS estimate.
Results missed expectations. 9MFY26 CNP of RM902.3m was at 61.4% and 69.2% of our and consensus expectations respectively. CNP missed our expectations due to higher-than-expected quarterly net JV & associate loss of -RM158.9m. 3QFY26 CNP was derived after excluding the following non-core items:
- Impairment loss of investment in an associate: RM1,621.25m
- Provision for and write-off of receivables: RM7.82m
- Provision for and write-off of inventories: RM12.06m
- Surplus on disposal of land: -RM1.99m
- Loss on government acquisition of land: RM0.09m
- Foreign exchange loss: RM21.28m
- Gain on derivatives: -RM28.72m
Of note was the impairment loss of investment in an associate amounting to RM1.6bn referring to the Group’s investment into Synthomer. As at 30 June 2026, the market value of the Group’s investment in Synthomer plc was RM190.1m, significantly below its carrying amount of RM1,811m, net of cumulative impairment losses of RM240m recognised in prior years. The Group had recognized the impairment owing to the prolonged decline in Synthomer’s market value, together with its slower-than-expected earnings recovery. Accordingly, the Group recognised the impairment loss, based on a recoverable amount of RM190.1 million, determined as the higher of value in use and fair value less costs of disposal.
9MFY26. 9MFY26 CNP had fallen 8.2% from RM983.2m, partially driven by higher JV losses throughout the year. Thus far, 9MFY26 net JV & Associate results stood at -RM158.6m (9MFY25: - RM49.39m). This is despite positive results in Plantation and Manufacturing operating profit of RM1,643.5m (+1.1%) and RM222m (358.9%) respectively.
YoY. 3QFY26 CNP fell by 16.5% to RM287.4m, driven mainly by the Group’s share of associate losses in Synthomer which had overridden improvements in Plantation and Manufacturing operating profit rising to RM658.3m (+7.6%) and RM136.5m (+106%) respectively. The gains in Plantation were attributed to higher PK prices of RM3,488 (3QFY25: RM3,420) and higher CPO and PK sales volume which was partially offset by softer CPO ASPs at RM3,756 (3QFY25: RM3,912). Manufacturing saw higher profit contributions from the Oleochemical division while the nonOleochemical division saw lower losses.
QoQ. CNP rose 3.8% QoQ, due to higher operating profit contributions from Plantations and Manufacturing. Plantations operating profit rose 85.3% while Manufacturing operating profit rose significantly by 5,128% from just RM2.6m in 2QFY26. Plantations had improved on the back of higher CPO and PK prices in 2QCY26 whereby CPO price increases followed the onset of the Middle-East conflict. Also, higher CPO and PK volumes were sold. As for Manufacturing, higher profit contributions from Oleochemicals and a reduced loss from Non-oleochemicals had more than offset losses incurred by Refineries.
Operational highlights. FFB, CPO, and PK production continues to improve YoY, however, Rubber production continues to decline owing to the Group’s diversification away from Rubber plantations. Nevertheless, CPO ASPs rose QoQ but fell YoY while PK ASPs rose QoQ and YoY.
Outlook. Regarding Plantations, we expect higher CPO prices to support topline performance in Q4FY26 and 6MFY27 driven by supply constraints from El-Nino conditions and increasing rampup in demand from Indonesia’s biodiesel programme. This would be partially offset by yield declines next year starting in 2QFY27. As mentioned in our sector report, our expectations are for moderate-strong El Nino conditions to effect lower monthly FFB yields with KLK’s yields to be impacted by 7% for 2Q & 3Q of FY27. We also had raised our average input CPO prices to RM4,800/RM4,600 in 1H/2HCY27 respectively. Regarding Manufacturing, despite recent performance, threats exist to the division’s recovery. Although topline performance has improved overtime, higher CPO feedstock prices may begin to squeeze Oleochemical margins further though this impact on Group performance is somewhat mitigated by KLK’s use of internal CPO feedstocks. Nevertheless, we expect Manufacturing earnings to continue recovering, although the magnitude of improvement will hinge largely on whether Oleochemical margin gains can outweigh persistent weakness in refining. Lastly, we expect persistent losses in Synthomer to continue weigh on earnings.
Earnings Revision and Assumptions. Although we have raised our earnings assumptions to reflect higher CPO prices, we have also incorporated higher expected associate losses from Synthomer. Consequently, our FY26F/27F CNP estimates are lowered by 8%/7%.
Valuation. We retain our BUY recommendation with a lower target price of RM23.80, from RM25.47 previously, by pegging 18.5x P/E multiple to our revised FY27F EPS of RM1.29 and 0% ESG factored premium/discount based on three-star ESG rating.
Risk. EU export bans and regulations, adverse weather affecting FFB production, Indonesia’s taxation and export policies affecting CPO demand, labour shortages, rising operating costs, and downstream competition.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.065852 | 4.097386 |
| EUR | 4.589381 | 4.597416 |
| CNY | 0.610175 | 0.610647 |
| HKD | 0.518032 | 0.522054 |
| SGD | 3.177971 | 3.202709 |