Offset packaging printing specialist HPP Holdings Bhd (HHB) has seen some investors’ interest on Jan 19, closing 3.2% higher to end the day at 32 sen. It is a rather positive sign having lost some 21% in value over the past one year. It fell to a low of 28 sen in April last year. The 3.2% increase in share price may not be significant but it is moving in the right direction.

HPP initial public offering (IPO) price was at 36 sen each and has attracted strong interest and oversubscribed by 33.44 times. The counter even opened at 57 sen at the opening bell. It might be a long time more before the counter can see this 57 sen level again. However, there could be signs of it going higher after touching a 52-week high of 46 sen.

This is despite HPP’s rather disappointing 1HFY24 results, which were dragged by higher input cost and weaker sales. Its 1HFY24 core net profit of RM2.4 million came in at only 19% of the full-year consensus estimate.

On a year-on-year basis, HPP’s 1HFY24 revenue dropped 19% mainly due to weaker sales at its non-corrugated packaging (declined 27% YoY) and rigid box (fell 36% YoY). Its core net profit fell by a steeper by 48% on high-cost inventory.

On a quarter-on-quarter basis,, its core net profit plunged 97%, weighed down by ESOS charge of RM1.3 million, which was non-cash. That said, analysts are anticipating a stronger 2HFY24 on HPP’s maiden contribution from its new high-margin recyclable paper pulp moulded packaging products, a substitute to similar Styrofoam packaging products.

This new product is expected to be in high demand given that it is cost-effective and not subject to hefty environmental taxes versus those imposed on Styrofoam packaging in various countries. The product has recyclable attribute, which meets stringent EU environmental standards.

In addition, there should also be pick up in HPP’s orders, particularly from the E&E segment on restocking by customers and new product launches.

Despite the stronger demand, Kenanga Research has cut its FY24-25 net profit forecasts by 25% and 11%, respectively, reducing its target price by 11% to 64 sen from 72 sen. This is to reflect the soft patch in demand for its non-corrugated packaging products and higher input cost.

Investors might want to some position in HPP given its strong long-term growth prospects, in the consumer electronics, sheath contraceptives, F&B and pharmaceutical segments.

Also, it is globally recognised with G7 Master Colourspace certification that enables it to establish a strong footing in the supply chain of MNCs, providing design, multi-colour and high- resolution offset or flexographic printing solutions.

Packaging products sector may not be a ‘sexy’ one but players such as HPP has special characteristics which could set itself apart from its competitors.