March 14, 2025
The CPO Market Shake-Up: Scarcity, Demand, and Opportunity

Market Commentary
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Indonesia’s government plans to focus on addressing scarcity and adding value in industries like crude palm oil (CPO) and tin. This initiative has driven prices higher. It is expected to boost tax revenue and unlock greater profit potential for businesses.
Looking at the CPO price trend over the past year, prices were initially low, fluctuating between 3,800–4,400 until mid-2024. However, starting in September, prices surged sharply, peaking above 5,200 in November. Although there were some corrections, prices remain significantly higher than before, stabilizing around 4,800 in early 2025. This indicates a strong upward trend compared to previous levels.

The price surge is primarily driven by a scarcity of CPO, caused by:
  • Increased Biodiesel Demand: As the world's largest palm oil producer, Indonesia escalated its biodiesel blending mandate to B35 (35% palm oil content) in 2024 and plans to further increase it to B40. This policy has significantly boosted domestic consumption, reduced export availability, tightened global supply, and driven up prices.
  • Stagnant Production Levels: Palm oil production growth has slowed due to limited land for new plantations, delays in replanting aging trees, and environmental concerns. This stagnation, combined with rising demand, has further fueled the price increase.
Given these factors, we believe there is still an opportunity in the CPO industry. Among listed CPO companies in Indonesia, TAPG stands out.

As shown in the table above, TAPG's price-to-earnings (PE) ratio is the second lowest among its peers, while its management efficiency is outstanding, with a 21.81% return on assets (ROA)—the highest in the sector—and a 28.87% return on equity (ROE).

 
Unlike companies with aging plantations, such as LSIP and AALI, TAPG has a well-balanced age profile, with trees averaging 12.5 years—still within or approaching peak productivity. This gives TAPG an advantage in maintaining stable and high yields over the coming years. Additionally, TAPG recorded the highest CPO yield ratio among its peers in 2023, thanks to its well-balanced plantation age structure.

In summary, the CPO industry has strong top-down support. Amidst global market uncertainty and unfavorable sentiment across multiple industries, CPO stands out as a resilient sector.
Based on the data outlined above, TAPG is our preferred pick in the sector due to its strong profitability and attractive valuation, with a PE ratio of just 5.57.
 

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