MBSB Investment Bank Bhd maintained its BUY call on Sarawak Plantation Bhd and raised its target price to RM5.36 from RM3.98, citing stronger earnings, improving estate yields and firm crude palm oil (CPO) prices as key drivers for the plantation group.
MBSB Research said 2QFY26 core PATAMI surged 74.1% year-on-year to RM31.1 million, exceeding both its and consensus expectations and accounting for more than 60% of full-year forecasts.
The stronger quarter was supported by a 54.9% increase in estate profitability to RM36.8 million while mill profitability edged up 1% to RM6.4 million. The improvement came as fresh fruit bunches (FFB) processed rose 6.7% year-on-year while realised CPO prices climbed 10.1% to around RM4,447 per tonne. Palm kernel prices also rose 7.2% to RM3,404 per tonne.
FFB production increased 12.6% year-on-year to 95,125 tonnes, helped by a higher contribution from young mature trees following aggressive replanting in recent years. MBSB said the stronger internal crop contribution also helped support mill utilisation despite lower third-party crop volumes.
Looking ahead, the research house expects around 1,000 hectares to mature in FY26-27, supporting higher internal FFB output, estate yields and oil extraction rates. Emerging El Niño conditions could also tighten regional palm oil supply and support CPO prices into 4Q26 and 1Q27.
MBSB raised its FY26-28 earnings forecasts by 23.9%, 24.9% and 21.2% respectively, citing higher CPO price assumptions and lower production costs.
As of 10.48 am, the stock price gained 4.41% to RM4.74.
