SLP’s 1QFY24 results beat expectations with CNP soaring by 64 per cent y-o-y
KUCHING: SLP Resources Bhd (SLP) have positively surprised analysts with its first quarter of financial year 2024 (1QFY24) core net profit (CNP) soaring by 64 per cent year on year (y-o-y) to RM4.7 million.
In a result note, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) guided that the group’s 1QFY24 CNP had met 29 and 28 per cent of theirs and consensus full-year earnings estimates, respectively.
According to the analyst, the positive variance was largely from stronger-than-expected margins that came from an improved product mix.
The group’s 1QFY24 revenue had only inched up by 1 per cent to RM40.8 million due to higher sales to Japan which cushioned weaker Australian and domestic sales.
But it’s bottom-line surged thanks to a greater proportion of higher-margin manufacturing sales compared to low-margin trading of resins and improved economies of scale from a higher production volume.
Looking ahead, Kenanga Research is expecting SLP to continue experiencing sustained recovery in demand for its plastic packaging products, especially with a strong offtake from the Japanese market which is expected to result in higher production, utilisation and operational efficiency.
“A booming tourism industry in Japan on the back of a weak Japanese Yen is boosting demand for SLP’s kitchen bags and garbage bags in that market,” said the research arm.
Meanwhile, SLP also expects to ride on the growing global trend of sustainable by focusing on premium products like its MDOPE film which is a fully recyclable mono film.
“Its new MDO-PE film machine with a production capacity of 230 metric tonne per month is on track to come on stream by Oct 2024, boosting its MDO-PE film production capacity by over 60 per cent to 600 metric tonne per month.
“By end-2024, we estimate that MDO-PE production capacity will make up about 25 per cent of its total production capacity,” Kenanga Research guides.
To reflect better future margins, the research arm shares that they are raising their FY24 and FY25 earnings forecasts for SLP by 13 and 12 per cent respectively to RM18.4 million and RM22.2 million.