Highlights

• We remain positive on PPB’s overall prospects, underpinned by resilient contributions from Wilmar and stronger performance expected from the film segment.
   
• However, the grains & agribusiness segment could remain a drag amid volatile commodity prices and elevated logistic costs with margin pressure to become more pronounced in 2H26. As such, we trim our 2026/27F forecasts by 2%/4%, reflecting conservative margin assumptions for this segment.
   
• Maintain BUY with a target price of RM12.55, as we believe much of the downside has already been priced in, with the stock currently trading close to -1SD of its five-year mean.
   

Analysis

• We remain positive on PPB Group’s (PPB) overall prospects, underpinned by resilient earnings contributions from Wilmar, its defensive staple businesses and a strong balance sheet. While the grains & agribusiness and consumer segments are expected to remain a drag on overall performance, improving performance from film exhibition and Wilmar’s resilient contributions should support the group’s overall earnings in 2026.
   
• Grains & agribusiness: Supply risk remains manageable. Global wheat prices have recently retreated from their Aug 26 peaks following stronger-than-expected Australia production and higher supply availability from Russia. Nevertheless, renewed tensions in the Black Sea, which account for around 20% of global wheat supplies, could continue to drive price volatility in the near term. We believe PPB’s exposure to supply disruptions remain relatively limited, as the group sources most of its wheat (flour feedstock) from Australia, where production is expected to remain above the country’s long-term average, supported by favourable rainfall conditions during mid-26.
   
• Margins pressure is likely to become more pronounced in 2H26. Commodity price volatility and higher logistic costs remain key concerns for the grains & agribusiness segment, with the impact on the segment’s margin expected to become more pronounced in 2H26 as existing hedging arrangements gradually expire. PPB’s hedging policy, which covers up to six months of requirements, provides some near-term cost visibility but may delay the pass-through of changes in input costs. We note that the group is unlikely to raise prices for consumer-pack flour, given that margins remain positive at current price levels. However, PPB has relatively greater pricing flexibility for industrial customers, which remains the key earnings contributor within the flour milling segment.