17/08/2022
BP Plastics Holding Bhd (BPPLAS)
– 2QFY22 Results Note Snippet
(i) Core net profit declined 17.4% YoY to RM12.2m due to elevated freight charges and higher production costs. QoQ, however, core net profit jumped 61.7%, largely arising from higher revenue backed by a better product mix, as well as better margin driven by a timely cost pass-through via higher selling price.
(ii) Resin market has been facing downward pressure since late-April, largely due to (a) growing upstream stockpile, (b) lower monomer cost, and (c) demand concerns stemming from continued Covid-19 shutdowns in China. We expect the downward trajectory in resin prices to persist, barring any unforeseen distruption on the supply.
(iii) BPPLAS remained committed to the commissioning of the 10th Cast Stretch Film machine by end of FY22 to boost the production capacity to 11kMT per month or 132kMT p.a. The group intended to acquire two Blown PE films machine by end-FY23 to add 700MT/month to nameplate capacity.
As the core net profit came in above our expectations, we upgraded our FY22f and FY23f earnings forecast by 21.9% to RM36.2m and 17.9% to RM38.8m respectively. The earnings forecasts will take into account the upcoming 10th Cast Stretch Film machine, two Blown PE films machine commissioning in FY23, solid demand amid global economic reopening, as well as the improving margin resulted from a better product mix coupled with a lower production cost. We upgrade BPPLAS to BUY (from HOLD), with a revised target price of RM1.93 as we rolled over to FY23f.
More at: https://mplusonline.com/articles/stock-digest-bp-plastics-holding-berhad-signs-of-margin-recovery
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Moving forward, we expect demand for plastic packaging to remain robust amid reopening of global economies. Nevertheless, the industry may still face the challenges arising from global economic uncertainties, ongoing conflict between Russia and Ukraine that strains the supply chain, as well as the f...