IOI Corporation Bhd is expected to face earnings pressure following the implementation of a 5% sales and service tax (SST) on palm kernel oil, according to a recent note by AmInvestment Research. The imposition is anticipated to compress margins within its oleochemical division, especially as Malaysian producers struggle to remain competitive against lower-priced Indonesian exports.
The research firm highlighted that IOI Corporation’s integrated business structure may not provide sufficient flexibility to pass the additional tax burden onto customers. In the third quarter of the financial year 2025 (3QFY25), the group’s oleochemical segment reported earnings before interest and tax (EBIT) of RM14.6 million. IOI currently operates with an annual oleochemical production capacity of 890,000 tonnes, the bulk of which is located in Malaysia.
Looking ahead, AmInvestment Research projects a 6% decline in EBIT for IOI’s manufacturing segment in the financial year 2026 (FY26), driven by persistent global economic uncertainty and its impact on overall demand.
Despite these headwinds, the research house expects a notable rebound in upstream production. Fresh fruit bunch (FFB) output is forecasted to increase by over 30% quarter-on-quarter in the fourth quarter of FY25 (4QFY25), providing a partial buffer against weaker palm oil prices.
The average crude palm oil (CPO) price realised is projected to decline to RM4,000 per tonne in 4QFY25, compared with RM4,667 per tonne in the previous quarter — representing a 14.3% decrease.
AmInvestment Research has reiterated its “Hold” recommendation on IOI Corporation, maintaining a target price of RM4.05, based on 18 times price-to-earnings for calendar year 2026.
-The Star
