Wilmar International is one of RHB Securities’ top picks among regional palm oil players as Chinese demand is set to rise ahead.
This comes as prices of soybean oil (SBO), an alternative to palm oil, have climbed significantly.
The brokerage has a “buy” rating for the stock with a target price of $6.45.
According to RHB, China’s crude palm oil (CPO) imports from Malaysia jumped 30% m-o-m as CPO stock levels decreased 15% y-o-y in May.
See also: Plantation sector to face downside CPO price risk in 2Q21; Wilmar among top picks: RHB
China’s imports are up 28% y-o-y year-to-date to April, it adds.
SBO is now at a “massive premium” of US$527 a tonne compared to prices of crude palm oil (CPO) of US$373 a tonne, it notes.
“With the large price gap between CPO and [soybean oil], we could see imports from China continuing to improve in the coming months,” RHB analysts Hoe Lee Leng and Christopher Andre Benas as well as the Singapore research team write in a note dated June 11.
With an expected increase in demand, palm oil production should continue to rise in the coming months, in the lead up to the peak season, says RHB.
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It notes that Malaysia’s palm oil production rose 2.8% m-o-m in May, though it declined 4.8% y-o-y.
Indonesia’s output year-to-date to March was up 11% y-o-y, it adds.
As at 1.49 pm, Wilmar was up 2 cents or 0.4% at $4.81 with 2.2 million shares changed hands.
