EUDR rules bring clarity for Malaysian planters, limited impact seen

KUALA LUMPUR: The finalisation of the EU Deforestation Regulation (EUDR) regulatory framework is expected to provide greater implementation clarity for Malaysian planters ahead of the regulation's application from end-Dec 2026.

Compared to the delegated act, Hong Leong Investment Bank Bhd (HLIB) said the implementing act has a much smaller impact on oil palm plantation companies.

HLIB noted that it primarily sets out the technical rules governing the EUDR Information System, including the submission of due diligence statements, simplified declarations and contingency procedures in the event of system outages.

"While the Delegated Act expands the regulation's scope to include additional downstream palm-based products, we expect minimal incremental compliance costs," it said in a note.

Overall, HLIB believes Malaysian planters, particularly those with established exposure to the EU market, are well positioned for the EUDR's implementation.

It said this is because they already established the necessary traceability and due diligence systems to meet its compliance requirements.

The firm reiterated its Overweight stance on the sector, underpinned by its expectation that elevated crude palm oil (CPO) prices will be sustained through the second half of 2026, supported by tightening supply conditions and resilient demand.

"We continue to favour planters with predominantly upstream operations and greater exposure to Malaysia, given their higher earnings leverage to CPO price strength and lower exposure to foreign regulatory and policy risks.

"For exposure, our top picks are IOI Corp Bhd and Hup Seng Plantation Bhd," it added.