CPO prices are surging due to supply side tightening and continuing positive demand from buyers. We initiate coverage of AEP Plantations with a BUY rating and a PT of 2280p. AEP is a vertically-integrated Indonesian palm oil producer that has just executed a transformational $162m bolt-on (PT Pinago Utama Tbk) in addition to a record FY25 (revenue +25% to $465.2m, PBT adj. +45% to $119.0m, EPS adj. +31% to 220.2¢, total dividend +59% to 81.0¢). Net cash ended FY25 at $231.8m (c.40% of equity); FTSE 250 promotion was achieved in September 2025. The investment case has three compounding layers: Indonesia's B40-B50 biodiesel mandate is creating a structural CPO demand floor of 12-13 million tonnes annually; AEP has a company-specific yield story: they're at 17.8t/ha vs a 23t/ha target: that gap closes regardless of where palm oil prices go. Third, genuine capital return with £8m share buyback announced January 2026 (in addition to FY25’s $11.4m programme).
