RHB keeps "Buy" on Johor Plantations, cuts target price to RM2.00

KUALA LUMPUR: RHB Research has maintained its 'Buy' recommendation on Johor Plantations Group Bhd (JPG), lowering its target price to RM2.00 from RM2.20 following its third-quarter earnings recovery.

The research firm said the revised target price represents an upside potential of 11.1 per cent from its market price of RM1.80.

In a note, RHB Research said JPG's third-quarter financial year 2026 core profit doubled quarter-on-quarter (QoQ), supported by higher fresh fruit bunch (FFB) production and lower unit costs.

Core profit rose 100.4 per cent QoQ to RM176.9 million, although it declined 13 per cent year-on-year (YoY), representing 70 per cent and 63 per cent of RHB Research's full-year and consensus estimates, respectively.

"We deem the results in line, as seasonally higher fourth-quarter financial year 2026 FFB output should support earnings, partly offset by softer crude palm oil (CPO) average selling prices (ASP) QoQ," it said.

The research house said FFB output increased 35.6 per cent QoQ, while the 12.6 per cent YoY decline reflected the seasonal crop cycle.

It added that improved weather conditions drove the recovery, although cumulative production remained weaker, with nine-month financial year 2026 FFB output down 11.8 per cent YoY.

"That said, the dry weather is still one of the key production drags, as seen in the weak year-to-date output.

"Nonetheless, management is confident that financial year 2026 FFB output will surpass the 1 million tonnes mark," it said.

For CPO, JPG recorded an ASP of RM4,683 per tonne in the third quarter of financial year 2026, up 0.8 per cent QoQ and 6.6 per cent YoY.

RHB Research said JPG secured premium pricing for its entire financial year 2026 output, with 70 per cent under identity preserved at RM200 to RM250 per tonne.

The remaining 30 per cent was under mass balance, fetching a premium of RM100 to RM150 per tonne.

However, CPO unit costs increased 10.9 per cent YoY to RM2,557 per tonne, driven by higher diesel prices, fertiliser prices and maintenance costs.

The research house consequently raised its financial year 2026 unit cost assumption to reflect the higher operating expenses. It also expects fertiliser requirements for financial year 2027 to push costs up by 15 per cent YoY.

"Overall, we trim financial year 2026 to financial year 2028 earnings by 2.9 per cent, 8.4 per cent, and 6.4 per cent after imputing for higher unit costs and lower palm kernel ASP premium," it said.

Despite the earnings adjustments, RHB Research said JPG's strong environmental, social and governance credentials continued to support its ability to command premium selling prices.

It added that the group's upcoming Integrated Sustainable Palm Oil Complex would further strengthen its downstream operations and support its transition into a fully integrated plantation group.

RHB Research expects the complex to begin commercial operations progressively in the first half of 2027, supporting JPG's transition into a fully integrated plantation group.