IOI Corp (IOI MK): Venturing Beyond The Estates; Keep BUY
- Maintain BUY and SOP-based TP of MYR4.30, 14% upside and c.3% FY26F (Jun) yield. Post-meeting with management, we remain upbeat on IOI Corp as its upstream earnings will continue doing well on the back of elevated CPO prices, while the group is embarking on new ventures to diversify its income streams. Valuation remains attractive – at 17.5x 2026F P/E – ie at the lower end of its peer range of 17-22x.
- FY26F FFB growth expected at 3-5% YoY. IOI achieved FFB growth in FY25F of +1.3% YoY, below its original target of 3%. While output saw a mini-peak in April, IOI expects production to pick up again in July, with a bigger peak in August-September. For FY26, it expects FFB output growth of +3-5% from better weather conditions. This is in line with our 4% forecast.
- Unit costs likely to be contained in FY26F. IOI expects FY25F costs to come in at around MYR2,000-2,100/tonne (flattish YoY). For FY26F, while IOI has yet to guide on unit costs, it has secured its 1HFY26 (2HCY25) fertiliser requirements at prices that are flattish YoY. We expect some increase in costs for FY26F from the full year impact of minimum wage and partial impact of foreign workers’ Employees Provident Fund (EPF) contribution, which is expected to raise costs by 2-3%. Our forecasts have imputed in 3-6% YoY increase in unit cost.
- Minimal impact from SST and tariffs. IOI has received a sales & service tax (SST) exemption from the Government on its procurement of PKO for its oleochemicals operations as it is classified under manufacturers. On the trading side, >90% of its trading volume consists of CPO and palm olein, which are also not subjected to SST. On US tariffs, management guided that there is no significant impact to IOI as c.90% of MY CPO production is exported to the EU as certified products, with <2% exported to the US.
- M&A focus. IOI continues to look for potential M&As for upstream brownfield landbank in Malaysia and Indonesia, while focusing on specialty oleochemicals in the pharmaceutical and personal care space for its downstream division. On solar projects, it is exploring to place a bid for the Corporate Renewable Energy Supply Scheme (CRESS), although recognising the internal rate of return (IRR) for solar projects is not as attractive now.
- New ventures. IOI is excited about its 33% stake in new pulp and paper JV using oil palm empty fruit bunches (EFB) with Nextgreen Global (NGGB MK, NR), to produce renewable pulp and paper products in Pekan. The first phase of the plant (150k tonnes) should be operational by 2028, with potential EBIT contribution of c.MYR30-50m. IOI has also ventured into the coconut plantation business, planting some 3,500ha of its peripheral landbank (target 4,600ha) with coconut trees. This is expected to bring in EBIT of MYR60-70m based on current coconut prices and full maturity of trees.
- Keep BUY with SOP-based MYR4.30 TP with a 2% ESG premium. Valuation remains attractive at 17.5x 2026F P/E, at the low-end of its peers’ 17-22x.
- Target Price (Return): MYR4.30 (+14%)
- Price (Market Cap): MYR3.76 (USD5,509m)
- ESG score: 3.1 (out of 4)
- Avg Daily Turnover (MYR/USD) 5.09m/1.21m
Analysts
Hoe Lee Leng
+603 2302 8110
hoe.lee.leng@rhbgroup.com
Iftaar Hakim Rusli
+603 2302 8114
iftaar.hakim.rusli@rhbgroup.com
Share Performance (%)
| YTD | 1m | 3m | 6m | 12m | |
|---|---|---|---|---|---|
| Absolute | (3.1) | 0.5 | 2.7 | 0.8 | (1.3) |
| Relative | 4.1 | 1.1 | 3.8 | 2.7 | 4.2 |
52-wk Price low/high (MYR): 3.46–4.05
Source: Bloomberg
Forecasts and Valuation
| Jun-23 | Jun-24 | Jun-25F | Jun-26F | Jun-27F | |
|---|---|---|---|---|---|
| Total turnover (MYRm) | 11,584 | 9,604 | 13,112 | 13,071 | 12,994 |
| Recurring net profit (MYRm) | 1,498 | 1,253 | 1,262 | 1,335 | 1,368 |
| Recurring net profit growth (%) | (24.3) | (16.3) | 0.7 | 5.8 | 2.5 |
| Recurring P/E (x) | 15.58 | 18.63 | 18.50 | 17.49 | 17.06 |
| P/B (x) | 2.1 | 2.0 | 1.9 | 1.8 | 1.7 |
| P/CF (x) | 13.82 | 17.11 | 23.36 | 13.18 | 12.79 |
| Dividend Yield (%) | 3.9 | 2.5 | 2.7 | 2.8 | 2.8 |
| EV/EBITDA (x) | 10.96 | 11.41 | 10.78 | 10.46 | 10.19 |
| Return on average equity (%) | 10.0 | 10.8 | 10.5 | 10.5 | 10.2 |
| Net debt to equity (%) | 13.5 | 13.1 | 14.2 | 9.5 | 5.0 |
Source: Company data, RHB
Overall ESG Score: 3.1 (out of 4)
E Score: 3.3 (EXCELLENT)
S Score: 2.7 (GOOD)
G Score: 3.0 (GOOD)
Please refer to the ESG analysis on the next page
Emissions And ESG
Trend analysis
In 2024, Scope 1 emissions decreased to 0.7m tonnes of CO2 equivalents (2023: 1.1m tonnes of CO2 equivalents) while Scope 3 emissions decreased to 4.4m tonnes of CO2 equivalents (2023: 6.7m tonnes of CO2 equivalents).
| Emissions (tCO2e) | Jun-22 | Jun-23 | Jun-24 | Jun-25 |
|---|---|---|---|---|
| Scope 1 | 1,244,966 | 1,061,676 | 745,129 | na |
| Scope 2 | 39,772 | 39,771 | 32,423 | na |
| Scope 3 | 6,709,998 | 6,709,998 | 4,385,920 | na |
| Total emissions | 7,994,736 | 7,811,445 | 5,163,472 | na |
Source: Company data, RHB
Latest ESG-Related Developments
Sustainability certification: As of end FY24, 100% of IOI’s mills and 96% of its estates are RSPO certified.
Traceability: As of end-FY24, IOI managed to achieve 100% traceability to plantation and mills.
Reducing GHG emissions: IOI plans to reduce its Scope 1 and 2 emissions by 40% by 2025 against its 2015 carbon intensity emissions and to achieve Net-Zero for Scope 1,2 and 3 by 2040.
ESG Unbundled
Overall ESG Score: 3.1 (out of 4)
Last Updated: 2 July 2025
E Score: 3.3 (EXCELLENT)
IOI discloses its greenhouse gas (GHG) emissions from each operating segment, and is forecasted to reduce its GHG emissions intensity by 19% in 2020 (from 2015) and 41% by 2025. This is likely to surpass Malaysia’s national commitment to reduce carbon emission intensity by 45% from its 2005 baseline, by 2030.
S Score: 2.7 (GOOD)
In 2017, IOI published its Foreign Workers Recruitment Guideline, which was developed with various stakeholders including NGOs. IOI is committed to ensuring continuous and consistent practices of human rights, while uniform labour laws are adhered to, via internal audits conducted by its sustainability team.
G Score: 3.0 (GOOD)
57% of IOI’s board members are independent, with full disclosure on director remuneration including salaries and bonuses on a named basis. IOI has an in-house investor relations team and holds investor meetings regularly, embodying good transparency and disclosure practices.
ESG Rating History
The ESG rating has progressed from 2.8 in Jul-23 to 3.1 in May-25.
Source: RHB
Financial Exhibits
Valuation basis
We use SOP valuation comprising target P/E of 18x 2026F for the plantations division and 18x for the downstream divisions as well as our target price for associate Bumitama Agri. This is backed up by an EV/ha of USD35,000/ha, which is at the higher end of its Malaysian big-cap peers.
Key drivers
i. CPO price movement;
ii. FFB production output;
iii. Competitiveness of its downstream processing division vs its peers.
Key risks
i. CPO price movement;
ii. Weather risks;
iii. The demand and supply dynamics of the global vegetable oil industry.
Company Profile
IOI Corp is a large integrated palm oil producer, with oil palm plantation land in Malaysia and Indonesia. It also has downstream manufacturing facilities like refineries, oleochemical, and specialty fats manufacturing plants.
Financial summary (MYR)
| Jun-23 | Jun-24 | Jun-25F | Jun-26F | Jun-27F | |
|---|---|---|---|---|---|
| Recurring EPS | 0.24 | 0.20 | 0.20 | 0.22 | 0.22 |
| DPS | 0.15 | 0.10 | 0.10 | 0.11 | 0.11 |
| BVPS | 1.82 | 1.88 | 1.98 | 2.09 | 2.21 |
| Return on average equity (%) | 10.0 | 10.8 | 10.5 | 10.5 | 10.2 |
Valuation metrics
| Jun-23 | Jun-24 | Jun-25F | Jun-26F | Jun-27F | |
|---|---|---|---|---|---|
| Recurring P/E (x) | 15.58 | 18.63 | 18.50 | 17.49 | 17.06 |
| P/B (x) | 2.1 | 2.0 | 1.9 | 1.8 | 1.7 |
| FCF Yield (%) | 4.6 | 3.0 | 1.7 | 5.0 | 5.3 |
| Dividend Yield (%) | 3.9 | 2.5 | 2.7 | 2.8 | 2.8 |
| EV/EBITDA (x) | 10.96 | 11.41 | 10.78 | 10.46 | 10.19 |
| EV/EBIT (x) | 13.97 | 14.69 | 13.69 | 13.36 | 13.09 |
Income statement (MYRm)
| Jun-23 | Jun-24 | Jun-25F | Jun-26F | Jun-27F | |
|---|---|---|---|---|---|
| Total turnover | 11,584 | 9,604 | 13,112 | 13,071 | 12,994 |
| Gross profit | 3,341 | 2,343 | 2,860 | 2,877 | 2,877 |
| EBITDA | 1,741 | 1,672 | 1,822 | 1,859 | 1,883 |
| Depreciation and amortisation | (374) | (373) | (387) | (403) | (418) |
| Operating profit | 1,367 | 1,299 | 1,435 | 1,456 | 1,465 |
| Net interest | (115) | (118) | (127) | (114) | (93) |
| Pre-tax profit | 1,526 | 1,536 | 1,697 | 1,776 | 1,812 |
| Taxation | (396) | (282) | (415) | (421) | (424) |
| Reported net profit | 1,114 | 1,247 | 1,262 | 1,335 | 1,368 |
| Recurring net profit | 1,498 | 1,253 | 1,262 | 1,335 | 1,368 |
Cash flow (MYRm)
| Jun-23 | Jun-24 | Jun-25F | Jun-26F | Jun-27F | |
|---|---|---|---|---|---|
| Change in working capital | 673 | (31) | (670) | 14 | 19 |
| Cash flow from operations | 1,689 | 1,364 | 999 | 1,772 | 1,826 |
| Capex | (605) | (664) | (600) | (600) | (600) |
| Cash flow from investing activities | 90 | (493) | (600) | (600) | (600) |
| Dividends paid | (869) | (589) | (621) | (652) | (652) |
| Cash flow from financing activities | (2,503) | (796) | (1,121) | (1,152) | (1,152) |
| Cash at beginning of period | 2,553 | 2,235 | 2,182 | 1,460 | 1,480 |
| Net change in cash | (725) | 75 | (722) | 20 | 74 |
| Ending balance cash | 1,851 | 2,314 | 1,460 | 1,480 | 1,554 |
Balance sheet (MYRm)
| Jun-23 | Jun-24 | Jun-25F | Jun-26F | Jun-27F | |
|---|---|---|---|---|---|
| Total cash and equivalents | 2,235 | 2,182 | 1,460 | 1,480 | 1,554 |
| Tangible fixed assets | 8,995 | 9,229 | 9,442 | 9,639 | 9,821 |
| Total investments | 3,013 | 3,103 | 3,103 | 3,103 | 3,103 |
| Total assets | 17,582 | 17,942 | 18,391 | 18,591 | 18,821 |
| Short-term debt | 862 | 709 | 709 | 709 | 709 |
| Total long-term debt | 2,951 | 3,047 | 2,547 | 2,047 | 1,547 |
| Total liabilities | 5,910 | 5,932 | 5,720 | 5,216 | 4,710 |
| Total equity | 11,672 | 12,011 | 12,671 | 13,375 | 14,111 |
| Total liabilities & equity | 17,582 | 17,942 | 18,391 | 18,591 | 18,821 |
Key metrics
| Jun-23 | Jun-24 | Jun-25F | Jun-26F | Jun-27F | |
|---|---|---|---|---|---|
| Revenue growth (%) | (25.6) | (17.1) | 36.5 | (0.3) | (0.6) |
| Recurrent EPS growth (%) | (24.2) | (16.3) | 0.7 | 5.8 | 2.5 |
| Gross margin (%) | 28.8 | 24.4 | 21.8 | 22.0 | 22.1 |
| Operating EBITDA margin (%) | 15.0 | 17.4 | 13.9 | 14.2 | 14.5 |
| Net profit margin (%) | 9.6 | 13.0 | 9.6 | 10.2 | 10.5 |
| Dividend payout ratio (%) | 82.4 | 47.5 | 49.2 | 48.8 | 47.7 |
| Capex/sales (%) | 5.2 | 6.9 | 4.6 | 4.6 | 4.6 |
| Interest cover (x) | 9.15 | 8.11 | 10.05 | 11.86 | 14.26 |
Source: Company data, RHB
Forecasts and Valuations
Figure 1: IOI’s forecast assumptions
| FYE Jun | FY23 | FY24 | FY25F | FY26F | FY27F |
|---|---|---|---|---|---|
| CPO selling price (MYR/tonne) | 4,118 | 3,856 | 4,100 | 4,050 | 4,000 |
| PK selling price (MYR/tonne) | 2,233 | 2,210 | 2,900 | 3,250 | 3,200 |
| FFB production growth (%) | (1.5) | 4.4 | 1.3 | 4.0 | 4.7 |
Source: RHB
Figure 2: SOP valuation
| Valuation basis | FV (MYRm) | |
|---|---|---|
| Plantation earnings (excluding net interest) | 18x CY26F P/E | 24,648.51 |
| Manufacturing earnings | 18x CY26F P/E | 1,709.61 |
| Add: 32.1% stake in Bumitama Agri | RHB’s fair value of SGD0.80/share | 1,469.58 |
| Less: Net debt (3QFY25) | (1,564.00) | |
| SOP (MYRm) | 26,138.80 | |
| No of shares* | 6,204 | |
| SOP/share (MYR) | 4.21 | |
| ESG premium/(discount) | 0.08 | |
| TP (MYR) | 4.30 |
Note: *Excludes treasury shares
Source: RHB
Recommendation History
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-07-08 | Buy | 4.30 | 3.79 |
| 2025-05-27 | Buy | 4.60 | 3.72 |
| 2025-02-25 | Buy | 4.90 | 3.82 |
| 2024-11-26 | Buy | 4.90 | 3.80 |
| 2024-11-11 | Buy | 4.90 | 3.95 |
| 2024-08-27 | Buy | 4.50 | 3.84 |
| 2024-08-11 | Buy | 4.45 | 3.73 |
| 2024-07-16 | Buy | 4.33 | 3.70 |
| 2024-05-26 | Buy | 4.40 | 3.98 |
| 2024-02-25 | Buy | 4.75 | 3.99 |
| 2023-11-28 | Buy | 4.65 | 3.99 |
| 2023-11-20 | Buy | 4.80 | 3.95 |
| 2023-08-23 | Buy | 4.55 | 3.97 |
| 2023-08-22 | Buy | 4.55 | 4.05 |
| 2023-07-23 | Buy | 4.75 | 4.07 |
Source: RHB, Bloomberg
