SLP Resources Berhad (SLP) reported higher net profit of RM4.9m in 1QFY24 (+63.1% YoY) primarily owing to better product mix and higher output. Results were in-line with our and consensus estimates, accounting for 28% and 29% of full year estimates respectively. We keep our forecast unchanged and retain our Underperform call with higher target price of RM0.86 (from RM0.73 previously) as we rollover over valuation base to FY25. On a side note, SLP declared a 1st interim dividend of 1.00sen for FY24 (FY23: 1.00sen).

• 1QFY24 revenue grew by 1.3% YoY to RM 40.8m, attributable to strongerdemands from the its export market (+24.5% YoY), boosted by higher demandfrom its key export market, Japan (+37.7% YoY). However, this was partlynegated by lower revenue from local and Australia market, which dropped by10.6% YoY and 53.4% YoY respectively.

• 1QFY24 net profit increased considerably by 63.1% YoY to RM4.9m mainlydue to better product mix and production efficiency achieved from elevatedproduction output. SLP saw its net profit margin for 1QFY24 increased by4.6ppts YoY to 12.1% (1QFY23: 7.5%).

• Outlook for the flexible plastic packaging industry continues to be weighed byglobal supply demand imbalance. Despite the soft market sentiment, there aresigns of gradual improvement in the operating environment with demandrecovery in 2024. Headline inflation is showing signs of cooling while Malaysia’sexport is expected to improve in tandem with the bottoming out ofsemiconductor industry. Besides that, the Group’s newly developed packagingproducts have gained favorable responses from clients and is expected tobreak into new market. However, earnings contribution from this new productis not likely to be meaningful at this juncture.

Source: PublicInvest Research - 6 May 2024