Kuala Lumpur - IOI Corporation Bhd expects crude palm oil (CPO) unit costs to reduce four per cent year-on-year (YoY) for financial year 2024 (FY24).

For the nine-month period ending March 31, 2024, the company's unit cost came in at RM2,250 per tonne.

"IOI has secured its fertiliser requirements up to the first half of financial year 2025, at flattish prices YoY, and is on track to achieve its application target for FY24. As such, management also expects flattish COO unit costs for FY25F. We adjust our cost forecasts upwards slightly to reflect this," RHB Research said in a note.

The firm maintained a "buy" call on the stock with a lower target price of RM4.30 from RM4.40 previously.

"We tweak our forecasts down slightly by 3–4 per cent for FY25F–26F after raising unit costs."

It added that the company's downstream operations are slowly showing margin improvement on a quarterly basis, driven by positive performances from the refinery and oleochemical segments in the third quarter.

Utilisation rates for its refineries are, however, still low, at 50 per cent, while oleochemical utilisation rates are around 60 per cent in the nine-month period.

"Going forward, while IOI expects the refinery subsegment to still continue facing stiff competition from Indonesia, the oleochemical subsegment is improving as demand picks up, coming from restocking activities.

"As such, management expects margin to improve to 3–5 per cent in 4QFY24 from 2-3 per cent in 3QFY24."

As of now, IOI is evaluating potential landbank monetisation for some of its aged plantation land areas for renewable energy development.

Currently, IOI has 24,000 hectares of plantation land in Johor and 19,000 hectares in Pahang.

Some land that could be suitable would include 2,000–3,000 hectares in Tangkak, Johor, and 1,000 hectares in Pahang, where the company could potentially rent land as well as operate solar assets, either on its own or with a JV partner.

Source: New Straits Times