Positive Prospects For Local Palm Oil Players From Indonesia’s B50 Plan

CIMB Investment Bank Bhd (CIMB Securities) has maintained its overweight call on the plantation sector, citing Indonesia’s plan to implement a 50% biodiesel blend (B50) mandate by the second half of 2026 as a long-term structural positive for crude palm oil (CPO) demand and prices. The research house said the move could trigger a potential re-rating of plantation counters such as SD Guthrie, IOI Corp, Ta Ann Holdings and Hap Seng Plantations.

According to CIMB Securities analyst Ivy Ng Lee Fang, the policy follows the successful rollout of the B40 programme and completion of its third testing phase. The final B50 trial, which began this year, is expected to conclude within six to eight months and involves testing the blend on ships, trains, heavy machinery and vehicles. Once successful, Indonesia will proceed with a nationwide rollout by 2H26.

The B50 initiative is designed to strengthen energy security, improve the trade balance and support domestic CPO consumption by reducing the country’s reliance on diesel imports. Indonesia’s Energy and Mineral Resources Minister Bahlil Lahadalia said the increased use of CPO in biodiesel would help boost smallholder income and curb the outflow of foreign exchange, as diesel imports currently account for about 10.5% of total fuel consumption or roughly 4.9 million barrels a year.

However, CIMB Securities noted that achieving the B50 target could pose feedstock challenges. Deputy Energy Minister Yuliot Tanjung revealed that the country would need about 19.73 million kilolitres (kL) of palm-based fatty acid methyl ester (FAME), which may require an additional 2.3 million hectares of oil palm plantations. As a contingency, the government may first roll out a B45 blend, which needs about 17 million kL of FAME, if feedstock availability becomes a constraint.

CIMB Securities estimates that the B50 implementation could generate an additional 4 million tonnes of CPO demand, representing a 5% increase from total 2024 consumption. This would tighten exportable palm oil supply and lend support to higher CPO prices. Nonetheless, the research house cautioned that potential delays could arise from insufficient CPO fund subsidies, limited biodiesel production capacity or concerns over food security.

CIMB’s top picks in the sector include SD Guthrie (Buy, target price RM5.15), IOI Corp (Buy, RM4.11), Ta Ann Holdings (Buy, RM4.27) and Hap Seng Plantations (Buy, RM2.23). Other notable mentions are Kuala Lumpur Kepong (Hold, RM21.50) and Genting Plantations (Hold, RM5.28).

CIMB Securities expects the planned B50 rollout to be a key long-term growth driver for plantation players, supporting Malaysia’s CPO export competitiveness and reinforcing regional demand fundamentals across the sector.

Tags: Indonesia, prices, Crude palm oil, biodiesel, consumption, demand, CIMB Investment Bank Bhd