SLP Resources Berhad (SLP) reported a higher net profit of RM4.9m in 3QFY22 (+60.3% YoY, +31.5% QoQ). Excluding gains of RM5.1m from the disposal of leasehold land in the previous quarter (2QFY22), the Group’s cumulative 9MFY22 core net profit came in at RM13.3m. Results were within our full-year expectations at 75% of estimates, though below consensus at 70%. Earnings improvements were mainly attributed to higher demand from domestic and overseas markets as well as better product mix. No change to our earnings estimates. We maintain our Neutral call with an unchanged TP of RM0.90 based on a 13x P/E multiple to its FY23F EPS. On a side note, SLP declared a 3rd interim dividend of 1.5 sen, bringing total dividend for 9MFY22 to 4.5sen (9HFY21: 4.0sen).

• 3QFY22 revenue increased to RM47.2m (+30.6% YoY, +0.4% QoQ), attributed to an increase in sales and volume from both the domestic and overseas markets.

• 3QFY22 core net profit increased to RM4.9m (+60.3% YoY, +31.5% QoQ), in line with higher revenue and stronger margin from better product mix and lower resin prices. Core net profit margin improved from 8.0% to 10.5% QoQ.

• Outlook for the Group is expected to remain challenging. While pricing for resins may have peaked and further consolidation is expected, the business environment remains volatile and uncertain. Demand for packaging materials could be temporarily compromised due to a strong USD, shortage of workforce and stubbornly-high operating costs. On a positive note, the Group has been granted approval from the government to initiate a fresh intake of labour which may ease its shortage situation. Nevertheless, the Group continues to invest and transform its production processes with more automation and digitalization as a long-term solution to its workforce-related challenges.

Source: PublicInvest Research - 7 Nov 2022