Summary

• BP Plastics Holding Bhd’s (BPPLAS) 2Q22 net profit declined 17.4% YoY to RM12.2m, leading to a 19.3% YoY decrease in 6M22 net profit. Nevertheless, the results came in above expectations, amounting to 66.3% of our full year forecast at RM29.7m and 56.9% of consensus forecast at RM34.6m. Key deviations were mainly due to the higher-than-expected margins in current quarter. Meanwhile, a second interim dividend of 1.5 sen per share, payable on 7th October 2022 was declared.

• QoQ, however, core net profit jumped 61.7%, largely arising from a higher revenue backed by a better product mix, as well as better margin driven by a timely pass through of resin price and freight rates via higher selling price.

• Resin market has been facing downward pressure since late-April, largely due to (i) growing upstream stockpile, (ii) lower monomer cost, and (iii) demand concerns stemming from the continued Covid-19 shutdowns in China. As resin continued to see price erosion in July 2022, we expect the downward trajectory in resin prices to persist, barring any major unforseen disruption on the supply.

• Production wise, capacity remained strong at 10kMT per month or 120kMT p.a. with 9 Cast Stretch Film machines running at around 60.0% utilisation rate. BPPLAS remained committed to the commissioning of the 10th Cast Stretch Film machine by end of FY22 to boost the production capacity to 11kMT per month of 132kMT p.a. In addition, the group intended to acquire two Blown PE films machine by end-FY23 to add 700MT/month to its nameplate capacity.

• The intended investment will be supported by BPPLAS’s net cash position stood at RM39.6 as at 2Q22, while net cash per share recorded at 14.1sen.

• Moving forward, we expect demand for plastic packaging to remain robust amid reopening of global economies. Nevertheless, the industry may still face the challenges arising from global economic uncertainties, ongoing conflict between Russia and Ukraine that strains the supply chain, as well as the fluctuating commodities prices. Uncertainties remain with hurricane season right around the corner.

Source: Mplus Research - 16 Aug 2022