Shariah Compliant

SD Guthrie (SDG MK)

9 July 2025

Value Unlocking Justifies Premium Valuation; Still BUY

Agriculture | Agriculture

Buy (Maintained)

Analysts

Hoe Lee Leng
+603 2302 8110
hoe.lee.leng@rhbgroup.com

Iftaar Hakim Rusli
+603-23028114
iftaar.hakim.rusli@rhbgroup.com

• Maintain BUY, with new MYR5.45 from MYR5.65 TP, 13% upside and c.3% FY26F yield. We expect 2026 to be a more balanced year fundamentally, with lower YoY CPO prices, but geopolitical risks will translate to more volatility. We lower our CPO, but raise our PK price assumptions for FY25-27. We like SD Guthrie for its value-unlocking strategy, which we believe deserves a premium valuation, as earnings contribution from its new verticals has yet to be priced in.
• Spot CPO prices have moderated from MYR4,600-4,800/tonne in 1Q25 to a low of MYR3,780 in May, only to bounce back to MYR3,900-MYR4,100 currently. The decline was mainly driven by geopolitics in the light of US trade tariffs, wars, and crude oil prices falling as a result, all of which pushed CPO prices in the same direction. We highlight that the correlation between CРО prices and crude oil prices surged to 0.47 in Apr 2025 from -0.6 in 1Q25, and subsequently rose further to the current levels of 0.68, due to more geopolitical risks.
• What’s next for CPO prices? We expect CPO prices to remain volatile given the ever-changing geopolitical situation. Fundamentally however, global supply and demand will likely be more balanced in 2026F, as supply improves, while demand should pick up given the more attractive relative prices.
• Supply of 17 oils and fats complex is expected to improve YoY in 2026F, coming from a partial recovery of palm, sunflower and rapeseed supplies, as well as continued growth from soybeans. Still, the stock/usage ratio of the 17 oils and fats complex is still expected to remain below the historical average of 13.6%, at 12.9% for Oct 2025F/Sep 2026F, albeit up from 12.7% in 2025F. This leaves very little cushion in case of any short-term bullish supply or demand surprises, hence raising the risk of price volatility going forward.
• What does this mean for relative prices of vegetable oils and demand? Ignoring the noises from geopolitics, we expect 2026F to see: i) Muted soybean prices, due to continued strong supply in 2026F; ii) SBO prices remain supported at higher levels, due to the higher demand from increased US biofuel blending; iii) CPO prices to continue trading at a discount to SBO in the medium term (currently at USD217/tonne discount); and iv) demand from price sensitive countries like India, Pakistan, Bangladesh come back.
• We trim our CPO price to MYR4,100/tonne (from MYR4,300) for 2025F and to MYR4,000 (from MYR4,100) for 2026F and 2027F; but raise PK prices to MYR3,300/tonne for 2025F (from MYR2,800) and to MYR3,200 for 2026F and 2027F (from MYR2,600). We also update for our latest in-house forex assumptions and adjust forecasts by -7.4%, -6.5% and -4.6% for FY25-27.
• Maintain BUY. We have raised SDG’s ESG score to 3.2 (from 3.0) and rolled forward our valuation target to 2026F. With this, our TP is lowered to MYR5.45 (from MYR5.65).

Share Performance (%)

Source: Bloomberg

Forecasts and Valuation

Overall ESG Score: 3.2 (out of 4)
E Score: 3.3 (EXCELLENT)
S Score: 3.0 (GOOD)
G Score: 3.0 (GOOD)
Please refer to the ESG analysis on the next page

Source: Company data, RHB

Emissions And ESG

Trend analysis

In FY24, Scope 1 emissions decreased to 9.4m tonnes of CO2 equivalents (-8% YoY) (FY23: 10.25m tonnes of CO2 equivalents) while Scope 2 increased to 187.7k tonnes of CO2 equivalents (FY23: 167.7k tonnes of CO2 equivalents). Scope 3 on the other hand, marginally decreased by 1% to 9.03m tonnes of CO2 equivalents (FY23: 9.13m tonnes of CO2 equivalents).

Source: Company data, RHB

Latest ESG-Related Developments

Achieving net zero: SDPL has developed a three-pronged approach achieve net zero emission target by 2050 ie i) accelerating renewables programme; ii) land use transformation; iii) enhancing supplier engagements.

Traceability: In 2024, SDG managed to achieve 84.9% traceability to plantation.

Sustainability certifications: In 2024, 100% of SDG’s upstream operations are RSPO certified.

ESG Unbundled

Overall ESG Score: 3.2 (out of 4)
Last Updated: 2 July 2025

E Score: 3.3 (EXCELLENT)
SDG has recorded a 21% decrease in GHG emissions intensity in 2024 as compared to 2023.It maintains its target to reduce its GHG emission by 50% by 2030 against 2020 baseline.

S Score: 3.0 (GOOD)
U.S. CBP has lifted the two-year ban on palm oil products for SDG on forced labour allegations. SDG continues to adhere to the International Labour Organisations Conventions and Free and Fair Labour Principles for all its employees.

G Score: 3.0 (GOOD)
50% of SDG’s board members are independent. Additionally, SDG provides full disclosure on director remuneration, which includes salaries and bonuses and on named basis. SDG has an in-house investor relations team and holds investor briefings regularly, embodying good transparency and disclosure practices.

ESG Rating History

The ESG rating started at 2.8 in July 2023 and increased to 3.0 from September 2023 through July 2025.

Source: RHB

Financial Exhibits

Figure 1: SDG’s progress on ESG factors

Source: Company data, RHB

Figure 2: SD Guthrie’s new business pillars

Financial Reporting on the New Business Pillars

Recurring Segment Expanded to Include New Pillars on Renewable Energy & Industrial Development

All outright & part disposals within the new business pillars will now be recorded as recurring gains from non-recurring previously

Source: Company data

Figure 3: SD Guthrie’s pipeline

Pipeline within the Group’s New Business Pillars

Key update and progress on the Group’s new Industrial Development and Renewable Energy pillars

Source: Company data

Figure 4: SDG’s forecast assumptions

Source: RHB

Figure 5: SOP valuation

Source: RHB

Figure 6: RNAV of SDG’s landbank (freehold land only)

Source: Company update, RHB

Recommendation Chart

Source: RHB, Bloomberg

RHB Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months

Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain

Neutral: Share price may fall within the range of +/- 10% over the next 12 months

Take Profit: Target price has been attained. Look to accumulate at lower levels

Sell: Share price may fall by more than 10% over the next 12 months

Not Rated: Stock is not within regular research coverage

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