However, it maintained its “neutral” stance on the plantation sector and earnings forecasts, target prices (TPs) and ratings for now.

“We will only adjust earnings forecasts, TPs and ratings on individual planters to reflect our new CPO price and fresh fruit bunches output assumptions in the upcoming results season starting from November 2023,” it added.

This is attributed to the lower CPO output anticipation, which is likely to be seen by the end of the first half of 2024 (H1 2024) or early H2 2024, it said.

HLIB said the current weakness in CPO price would likely be temporary and is expected to recover from 2024, as the current high palm oil stockpile in major palm-producing countries, such as Malaysia and Indonesia, would likely peak soon on the back of peaking palm production.

“Favourable palm oil-gas oil (POGO) spread, if prolonged, will likely encourage palm oil demand, and the lagged impact of El Nino on palm production will also likely kick in from H2 2024 onwards,” it said in a note today.

According to the investment bank, CPO price has been trending down recently, with the year-to-date average price standing at RM3,866 per tonne due to several bearish factors.

Those factors included seasonally higher palm cropping patterns, high vegetable oil stock levels among key vegetable oil-consuming countries, and weak demand sentiment for vegetable oils, including palm oil, it said.