Fertiliser prices skyrocketed up to 80% y-o-y in late 2022, when most plantation companies would have purchased the fertiliser for application in 1H2023. Additionally, plantation companies have sped up fertiliser application in 2QFY2023, ahead of El Nino in 2H2023 so they would have bought fertiliser at a high cost.
UOB Kay Hian analysts Leow Huey Chuen and Jacquelyn Yow have upgraded the plantation sector to “overweight” as they expect the sector’s share price performance to strengthen, along with a crude palm oil (CPO) price uptrend.
The upgrade also factors in operating margin expansion in 2H2023 and 2024. This is on the back of lower fertiliser costs, higher sales volume and higher CPO average selling prices.
