Electric Vehicles to Drive IOI Operations Efficiency and Profit Growth

IOI Corporation Bhd. is poised for enhanced operational efficiency and expanding profit margins, largely driven by the integration of electric vehicles (EVs) into its core activities, particularly in harvesting and estate management. Phillip Capital Research highlights that the adoption of electric machinery, coupled with estate redesign, is expected to significantly increase harvesting productivity.

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The use of electric machinery and redesigned estates will not only increase harvesting productivity but also reduce the group's dependence on labor and lower unit operating costs in the medium to long term.

This strategic shift is also anticipated to reduce IOI's reliance on manual labor and lower per-unit operating costs in the medium to long term. These initiatives are being implemented as IOI enters a multi-year production recovery phase, supported by a maturing estate profile resulting from accelerated replanting efforts over the past decade.

Phillip Capital forecasts a high single-digit increase in fresh fruit bunch (FFB) production for the 2027 financial year. This growth will be fueled by a greater contribution from newly maturing replanted areas and the use of high-yielding planting materials. The increasing output from these mature trees is expected to drive production growth, thereby improving capacity utilization and operational leverage.

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These initiatives are expected to support gradual margin expansion, positioning IOI well to record sustainable earnings growth throughout FY27-28.

Furthermore, the anticipated rise in operational efficiency will assist IOI in better managing cost pressures, especially within a challenging labor cost environment. Phillip Capital maintains its 'buy' recommendation for IOI, raising its 12-month target price to RM5.04 from RM4.65, reflecting a more optimistic outlook on the company's financial prospects.

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IOI management expects fresh fruit bunch (FFB) production to increase at a high single-digit rate for the 2027 financial year, driven by a larger contribution from maturing replanted areas and the use of high-yielding planting materials.