>Global CPO supply is expected to remain broadly flat in FY26F, as Indonesia and Malaysia continue to face structural constraints from aging plantations. Smallholder replanting progress remains slow despite government targets, keeping productivity stagnant and limiting output recovery.

>On the demand side, domestic consumption is poised to strengthen following the B50 mandate in FY26F, with total biodiesel demand estimated to require >19 mn kL (~21–22 mn tons of CPO). With tight supply and solid demand, we estimate CPO prices to stay elevated at MYR 4,200–4,800/MT, with upside potential should weather disruptions occur.

>Meanwhile, persistent geopolitical tensions continue to limit the correction in global fertilizer prices, with the Global Fertilizer Price Index hovering at ~USD 678/MT (+25.8% YTD). Export restrictions in China and supply constraints from Russia, Belarus, Qatar, and North Africa are pushing up prices of urea, DAP, and potash, reinforcing expectations of above-historical fertilizer cost levels into FY26F.

>Indonesia’s CPO export profile is set to become more diversified after the IEU–CEPA agreement opens access to the EU market, reducing reliance on India and China, which currently absorb ~33% of total exports. Producers with RSPO certification stand to benefit from assured market access, lower rejection risks, and potential EU premium pricing under the EUDR framework.

>We maintain an OVERWEIGHT rating on the plantations sector, supported by structurally tight supply and resilient demand. Companies with efficient cash cost and young plantation age remain best positioned to sustain margins, while downstream exposure offers additional flexibility amid price volatility. Top picks: STAA (TP: Rp1,400) and TAPG (TP: Rp1,700), given their competitive cost profiles and younger estate portfolios.

>Downside risks include: (1) CPO price volatility, (2) policy shifts in exports or biodiesel mandates, and (3) further fertilizer inflation linked to geopolitical risks.

By Phintraco Sekuritas | Research
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