MIDF raises earnings forecasts on Daibochi


  • Analyst Reports
  • Friday, 18 Sep 2020

KUALA LUMPUR: MIDF Research is revising higher its earnings estimates for Daibochi Bhd as it takes into account the resilient demand for flexible plastic packaging from the group's customers coupled with the expected increase in production capacity.

On the back of the group's release of its FY20 financial performance, the research house adjusted its earnings estimates upwards for FY21 and FY22 to RM50.3mil and RM50.8mil respectively.

In tandem, its target price on the stock was raised to RM2.92 from RM2.66 previously.

Daibochi's net profit for the financial year came within expectations, said MIDF, which reiterated its "buy" call on the counter.

The group's FY20 bottom-line came in at RM47.7mil, which accounted for 106% and 97% of MIDF's and conesensus full-year estimates respectively.

There is no comparative preceding period due to the change in the group's financial year end.

According to MIDF, Daibochi's domestic market made up 55.4% or RM343.1mil of total revenue while exports contributed to the remaining 44.6%.

On expansion plans, Daibochi has allocated an additional RM40mil to purchase eight more production lines, with four lines already contracted to date.

The group previously announced an allocation of RM60mil for the purchase of 13 new machines. To date, seven machines have been commissioned in FY20 while the remaining six are expected to be commissioned in FY21.

"With an estimated increase in total capacity of roughly 60% upon commissioning, we postulate that the expanded capacity may contribute positively to the group’s bottom-line over the intermediate-term," said MIDF.
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