Evergreen Fibreboard upgraded to ‘buy’

Evergreen Fibreboard Bhd’s subsequent quarters are expected to improve as its Indonesian medium-density fibreboard (MDF) line is expected to see its capacity increase postcompletion of the relocation from Malaysia.

Hong Leong Investment Bank Bhd (HLIB Research) anticipates a meaningful turnaround in the second half of 2024 for Evergreen due to new capacity in the Indonesian MDF line expected to come online in the third quarter of 2024.

“Indonesia production capacity is expected to double to 20,000 cubic meters (m3) a month from 10,000 m3 within six months of the commercial run as the group fine tunes its operations, familiarising itself with its production parameters and settings.

“We expect the additional production output to be well-absorbed by demand from the local Indonesian market as well as to be exported to the Middle East market,” it said.

Meanwhile, HLIB Research said Evergreen’s ready-to-assemble (RTA) sales to the United States and European Union are expected to recover in second half of 2024 should the US Federal Reserve begin to cut rates.

Moreover, it said Evergreen has also begun to diversify into Japan by increasing its RTA sales to the country, with management also looking at exporting panel boards to the Japanese market in the future.

“We raise our financial years 2024 and 2025 forecasts by 25per cent and 21.1 per cent, respectively, after imputing higher contributions from its Indonesia segment.

“We upgrade the stock to ‘buy’ with a higher target price of 42 sen.”