IOICORP: Undervalued Big Cap Poised for Balance Amidst Volatile CPO Market
Summary (TL;DR):
- Research Firm: RHB Investment Bank
- Subject: IOICORP / IOICORP (1961)
- Core Rating: BUY
- Target Price / Top Picks: MYR 4.30
- One-Liner: RHB Investment Bank maintains a BUY rating on IOICORP, viewing it as an undervalued big-cap stock positioned for a more balanced fundamental year in 2026 despite ongoing CPO price volatility.
Report at a Glance
RHB Investment Bank released its latest research report on IOICORP on 2025-07-09, maintaining a “BUY“ rating with a target price of MYR 4.30. The core thesis of the report is that IOICORP remains an undervalued big-cap player, trading at the lower end of its peer valuation range, and is set to navigate a fundamentally more balanced year in 2026 despite continued volatility in CPO prices driven by geopolitical factors.
Investment Thesis (The Bull Case)
- Point 1: IOICORP is considered undervalued, trading at 17x FY26F P/E, which is at the low end of its peer range of 17-22x.
- Point 2: The global supply and demand for the 17 oils and fats complex are expected to be more balanced in 2026F, driven by improved supply from palm, sunflower, rapeseed, and soybeans.
- Point 3 / Key Beneficiaries: Demand for CPO is anticipated to pick up, particularly from price-sensitive countries like India, Pakistan, and Bangladesh, as CPO prices continue to trade at an attractive discount to Soybean Oil (SBO).
Potential Risks (The Bear Case)
- Risk 1: Continued volatility in CPO prices due to ever-changing geopolitical situations, US trade tariffs, wars, and crude oil price movements.
- Risk 2: Weather risks, such as adverse weather patterns, can significantly impact Fresh Fruit Bunch (FFB) production and overall CPO supply.
- Risk 3: The broader demand and supply dynamics of the global vegetable oil industry, which could be affected by factors like US biofuel blending policies impacting SBO prices.
Financial Forecast Summary
The analyst’s financial projections for the coming years are as follows:
| Fiscal Year (YE to June) | FY25F | FY26F | FY27F |
|---|---|---|---|
| Revenue (RM mil) | 13,112 | 13,071 | 12,994 |
| Net Profit (RM mil) | 1,262 | 1,335 | 1,368 |
| EPS (sen) | 20 | 22 | 22 |
| DPS (sen) | 10 | 11 | 11 |
| Dividend Yield (%) | 2.7 | 2.8 | 2.8 |
| P/E Ratio (x) | 18.41 | 17.39 | 16.97 |
(Source: RHB Investment Bank research report)
Valuation & Target Price
| Rating | BUY |
| Last Close Price | MYR 3.74 |
| Target Price (TP) | MYR 4.30 |
| Valuation Methodology | The valuation is based on a Sum-of-Parts (SOP) approach, applying a target P/E of 18x 2026F for both the plantation and downstream divisions, and incorporating RHB’s fair value for its associate Bumitama Agri. This is further supported by an EV/ha of USD35,000/ha. |
Analyst’s Conclusion
- Overall Stance: RHB maintains a “BUY” rating on IOICORP, viewing it as an undervalued large-cap stock with robust fundamentals and strong ESG performance.
- Key Catalyst/Strength: The company’s current undervaluation relative to peers, coupled with an anticipated more balanced global supply-demand outlook for oils and fats in 2026F, and its excellent ESG score (3.1 out of 4).
- Major Headwind/Risk: Persistent volatility in CPO prices driven by unpredictable geopolitical events and the broader dynamics of the global vegetable oil market.
- What to Watch: Investors should monitor the evolving geopolitical landscape, global supply and demand trends for the 17 oils and fats complex, and the impact of US biofuel blending on Soybean Oil (SBO) prices, which could influence CPO’s relative attractiveness.
Disclaimer: This article is a summary and interpretation of a research report published by RHB Investment Bank on 2025-07-09. All information is for reference purposes only and does not constitute investment advice. Investors should conduct their own independent research and due diligence and assume all associated risks.
