PETALING JAYA: HPP Holdings Bhd
can expect some recovery in demand from the consumer electrical and electronics (E&E) and contraceptive industries and margin expansion with economies of scale in financial year 2025 (FY25) and FY26.
However, it is unlikely to return to peak Covid-19 revenue and earnings per share (EPS) levels in the medium term, said CSI International (CGSI) Research.
Based on its projections for FY25 and FY26, revenue growth of 15.3% and 11.9% and an uptick in gross margin to 20% to 21% from 18.6% in FY24 can be expected.
Its FY25 and FY26 core EPS forecasts are marginally adjusted upward by 0.9% to 1.7% as a result, CGSI Research said.
The research house maintained its “reduce’’ call on the stock with an unchanged target price of 31 sen a share.
It said without an acceleration in EPS growth and margin drag from its new paper pulp moulded packaging operations, it expects valuations at 28.3 times FY25 price earning ratio (P/E) as stretched.
This is against a backdrop of lower FY25/26 EPS projected vis-a-vis FY23 as well as packaging material-related peers’ average of nine times 2025 P/E.
The key upside risks cited include faster-than-expected rebound in demand for consumer E&E products resulting in greater sales of HPP’s corrugated packaging products.
Other upsides include lower-than expected input material costs, such as paper, foams, ink and better-than-expected takeup of the group’s new renewable packaging products.
