SLP Resources Berhad (SLP) reported a headline net profit of RM8.9m in 2QFY22. Excluding gain of RM5.1m from the disposal of leasehold land, the Group’s cumulative 1HFY22 core net profit came in at RM8.3m. Results were below consensus and our expectations, accounting for 40% and 44% of our and consensus full-year estimates respectively. We keep our forecasts unchanged however as we expect SLP’s margin to improve in 2HFY22 with resin prices likely to have peaked and some moderation expected in the coming months. We retain our Neutral call with an unchanged TP of RM0.90 based on a 13x P/E multiple to its FY23F EPS. SLP declared a 2nd interim dividend of 1.5 sen, bringing total dividend for 1HFY22 to 2.5sen (1HFY21: 2.5sen).
- 2QFY22 revenue increased to RM47.1m (+13.3% YoY, +3.4% QoQ) mainly due to increase in sales of flexible plastic packaging products and plastic resins, mainly from the domestic market.
- 2QFY22 net profit grew to RM8.9m (+89.3% YoY, +93.3% QoQ). Excluding gain of RM5.1m from the disposal of leasehold land, core net profit fell to RM3.8m (-19.7% YoY, -18% QoQ), the decline mainly due to a hike in raw material cost and notable surge in freight cost. Core PAT margin fell to 8% (2QFY21: 11.3%, 1QFY22: 10.1%).
- Outlook for the Group is expected to remain challenging. While pricing for resins may have peaked and is expected to moderate in the coming months, demand for packaging materials could be temporarily compromised due to a strong USD, shortage of workforces and stubbornly-high operating costs. Internally, the Group continues to invest and transform its production processes with more automation and digitalization to iron out long-term solutions on workforce challenges.
Source: PublicInvest Research - 8 Aug 2022