We initiate coverage on HPPHB with an OUTPERFORM call and a TP of RM0.46. The group specialises in the printing and production of paper-based packaging, offering tailoredmade high-quality multi-colour printing and packaging services to MNCs including Customer D (a renowned privately-owned innovator of high-tech consumer electronic appliances). The growing global consumer electronics market augurs well for HPPHB.

HPPHB specialises in the printing and production of paper-based packaging (corrugated, non-corrugated packaging, and others such as brochures, leaflets, and paper bags) as well as trading and production of rigid boxes. HPPHB offers tailored-made highquality multi-colour printing and packaging to MNCs in the space of consumer electronics, sheath contraceptives, food and beverages (F&B) and pharmaceuticals, with names such as Customer D (a renowned privately-owned innovator of high-tech consumer electronic appliances), Sony, Karex, Beryl’s and Kotra Pharma.

The global consumer electronics market is projected to grow at a CAGR of 5.1% from 2022 to 2030 backed by: (i) strong demand for various home improvement products and electronic devices for personal and professional use, and (ii) higher disposable income driving the improvement in the standard of living with solid demand for luxury and technological products. This augurs well for HPPHB which supplies printed packaging materials to the industry.

We project HPPHB’s earnings to recover by 46% and 25% YoY in FY23 and FY24, respectively, driven by: (i) the recovery in demand from the consumer electronics segment, and (ii) the onboarding of new customers including Customer W (the manufacturing arm of a global PC giant) and Customer P (a USbased diet meal provider).

We initiate coverage on HPPHB with an OUTPERFORM recommendation and a TP of RM0.46 based on FY23F PER of 13x, at a premium to the average forward multiple of our universe of manufacturing stocks of 11.8x to reflect: (i) the strong growth prospects of the consumer electronics industry that is the main costumer of HPPHB’s printed packaging materials, (ii) HPPHB, armed with a globally recognised G7 Master Colourspace certification, has carved itself a strong footing in the supply chain of MNCs, providing design, multicolour and high-resolution offset or flexographic printing solutions, and (iii) its enviable client base with prestigious names such as Customer D that speaks volume for its proven product and service quality. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 8)

Risks to our call include: (i) volatility of the cost of inputs particularly paper pulp, (ii) its customer concentration, and (iii) recovery in demand for packaging industry from the pandemic cut short by a global recession.

Source: Kenanga Research - 3 Nov 2022