PETALING JAYA: Sandakan-based bottled water producer Life Water Bhd
is expected to see demand remaining robust as the company more than doubles its capacity by financial year ending June 30, 2028 (FY28) from FY24, says CIMB Research.
The research house has maintained a “buy” call with an unchanged target price of RM1.77 pegged to 18 times 2027 price-to-earnings, a 20% discount to peers’ 22.6 times.
It also projects a core net profit compound annual growth rate of 16.8% over FY25 to FY28.
The research house said the company’s management has reiterated that demand remains robust, supported by a 14.3% correction of polyethylene terephthalate (PET) resin prices compared to the May peak.
Food and beverage firms commonly use recyclable PET plastic for packaging. PET resin prices have retreated to US$1,200 a tonne from a peak of US$1,400.
Life Water passed through higher costs to customers – arising from higher resin prices and Sabah’s 15% electricity tariff hike – by increasing the per carton price by 60 sen effective from May.
The company “is confident the selling price hike fully covers cost inflation at current levels. Near-term margins are further buffered by one to two months of low-cost resin inventory locked in at US$850 to US$900 per tonne”.
“Additional margin support is expected from higher operating leverage, tighter cost control, and increased production automation. We expect these levers to drive earnings before interests, taxes, depreciation and amortisation margin expansion in the fourth quarter ending June 30, 2026 (4Q26) and into FY27.”
It added that the company’s initiatives remain on track, with drinking water production capacity to expand by 40% to 626 million litres as at 1Q26, a new PET blow-moulding machine to lift carbonated drinks utilisation to 60% by end-4Q26 (from 45% in 3Q26), three new distribution centres in Sabah, as well as the expansion of its truck fleet.
“We view the capacity and logistics build-out as the key enabler of Life Water’s FY27 volume ramp, with broader distribution reach supporting deeper market penetration,” it said.
