FY21 CNP of RM46.4m is spot on our estimate. QoQ, revenue was higher due to more robust sales and higher ASPs. However, we cut FY22E CNP by 8% on the back of supply chain disruptions. Maintain OP with a lower TP of RM2.07 (from RM2.22) based on FY22E EPS of 17.2 sen at 12x PER. Spot on our estimate. FY21 CNP of RM46.4m hit spot on our full-year estimate, while 4QFY21 DPS of 2.0 sen brought FY21 DPS to 8.0 sen (after account for 1:2 bonus issued on 13 Dec 2021), which is also within our estimate.

YoY, FY21 revenue increased by 41.2% to RM447.2m thanks to higher sales volume from existing customers and higher ASPs for its products. PBT rose 45.4% in tandem with revenue due to a better product mix. All in, the group CNP rose 57.5% on a lower effective tax rate of 18.2% (vs. FY20: 24%).

QoQ, 4QFY21 revenue rose 10.2% to RM124.9m (vs. 3QFY21: RM113.3m) on the back of: (i) stronger demand, and (ii) higher ASPs in tandem with higher resin prices. PBT also rose, by 16%, likely due to better operational cost efficiency. Due to lower effective tax rate of 15.2%, CNP rose 20.1%.

Outlook. As the global economy stays on the path to recovery, we remain optimistic on BPPLAS’s outlook due to: (i) its ability to fulfill strong demand for its products with its utilization rate running at an average of 70-75% (vs. 4QFY21: 75-76%) and (ii) elevated ASPs in tandem with the surge in resin costs. Recently, resin prices have rebounded significantly (c.8-10%) since early January, which we assume will continue to stay elevated until 1HCY22 due to global supply chain disruption caused by logistic issues and higher crude oil prices. Factoring in both elevated ASPs and increased resin costs, our PBT margin assumptions stand at 12.3% for FY22 and 11.5% for FY23, versus FY21’s 12.7%.

Post results, we reduce FY22E CNP by 8% to RM48.5m (from RM53m) due to supply chain disruption on higher freight cost and costlier material cost, and we also lower FY22E DPS to 8.0 sen (from 11.25 sen), implying 5.3% yield. We introduce FY23E CNP of RM51.1m and DPS of 8.0 sen.

Maintain OUTPERFORM with lower TP of RM2.07 (from RM2.22) based on FY22E EPS of 17.2 sen (after 8% earnings cut) implying an ascribed PER of 12x, which is above its 5-year mean of 8.4x. We believe BPPLAS deserve the valuation for the resilient demand for its products and ongoing capacity expansion plan.

Risks to our call include: (i) faster-than-expected ASP declines, (ii) lower than-expected export demand, (iii) foreign currency risk, and (iv) labour shortage.

Source: Kenanga Research - 24 Feb 2022