Kenanga Research said the demand for plastic packaging in general “is mixed with average selling prices weakening on both competitive pricing and domestic currency appreciation”.
PETALING JAYA: The plastic packaging industry will continue to face multiple challenges in the near term such as higher operating costs, intense competition and currency volatility together with an uncertain outlook due to the US tariffs.
Kenanga Research, which has maintained a “neutral” call on plastic packaging stocks, said the demand for plastic packaging in general “is mixed with average selling prices (ASPs) weakening on both competitive pricing and domestic currency appreciation”.
The research house expected the ringgit to appreciate to 4.08 to the US dollar in 2026 from 4.25 average in 2025.
“As such, the stronger ringgit is expected to continue exerting pressure on ASPs and profit margins through foreign exchange (forex) translation effects.
“Based on general estimation, every 1% change in forex could impact 2% to 3% of the sector’s profitability,” it said, adding that despite lower resin prices, operating costs could lower profitability by 5% to 15%.
A decline in global trade volumes would have dampening effects by reducing overall consumption of plastic packaging materials.
A significant proportion of plastic packaging films is used in business-to-business trades, according to the research house.
It noted that competition from both Chinese and local players is expected to persist and likely to further intensify moving forward.
The research house also did not foresee near term rerating catalysts for the plastic packaging stocks, which had been facing a challenging market since last year from a combination of slower global demand, overcapacity and dumping by Chinese players to South-East Asia in response to lower demand from US and European buyers.
Kenanga Research considered SLP Resources Bhd
its top pick with an “outperform” call and target price (TP) of RM1 a share while remaining positive on Thong Guan Industries Bhd with an “outperform” call and TP of RM1.44 a share.
