PETALING JAYA: Elevated cost pressures may see BP Plastics Holdings Bhd’s outlook being challenged moving forward for the time being.
This is due to the ongoing strains on supply chains, higher commodity prices, electricity tariffs and higher minimum wages, said PublicInvest Research.
“While pricing for resins may have peaked in April 2022 and some moderation is expected in the coming months, increase in its average selling prices may not be sufficient to mitigate the surge in production costs due to the global supply chain disruptions and uncertainties surrounding the conflict in Ukraine,” said PublicInvest Research.
The research house also noted that the demand for packaging materials could also be temporarily compromised due to a strong United States dollar, a general shortage of workforce worldwide and stubbornly-high operating costs.
“We retain our ‘neutral’ call with an unchanged target price of RM1.40, based on a 13 times price to earnings ratio multiple to its forecast financial year 2023 (FY23) earnings per share,” PublicInvest said.
Following the reported second quarter 2022 revenue, which rose by 28.1% year-on-year (y-o-y), the company’s management said it remains cautiously optimistic about revenue growth.
This is expected to be underpinned by sustained demand for plastic packaging products, even though there are some concerns over the pace of the economic recovery, it said.
However, the quarter’s net profit was down 17% y-o-y due to a notable surge in freight costs and higher production costs.
“For the first half of the 2022, its results were above expectations, accounting for 66% and 57% of our and consensus full-year estimates respectively. We keep our forecasts unchanged,” the research house said.
