Techbond’s 1HFY24 earnings triple with strong sales

Adhesive manufacturer Techbond Group Bhd’s (Techbond) first half of financial year 2024 (1HFY24) core net profit (CNP) has increased by 309 per cent year on year (y-o-y) to RM8.8 million from RM2.9 million in the previous year.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the robust earnings growth were driven by strong sales of adhesive and sealant products and further support by maiden contribution from the group’s newly acquired Malaysian Adhesive and Chemicals (MAC) asset from PPB Group Bhd back in 2023.

The higher sales and maiden contribution from MAC caused the group’s 1HFY24 revenue to surge by 59 per cent to RM76.5 million while its CNP more than tripled due to normalisation of input costs and a more favourable sales mix of higher margin products.

Despite the robust earnings growth, the group’s 1HFY24 earnings had only met 44 per cent of Kenanga Research’s full-year forecast.

However, this was not seen as an issue as the research arm deemed the results to be within expectations as they anticipate Techbond to post a strong 2HFY24 results that will be supported by sustained uptick in sales and synergy from operational and marketing integration from its MAC.

Looking ahead, Kenanga research reckons that adhesive manufacturer’s long-term growth trajectory is underpinned by full-year contribution from MAC, synergy from its integration into its existing operations and the cross-selling of its products to its wider client network.

“To recap, Techbond’s existing products mainly cater to the timber panel, wooden furniture as well as fast-moving consumer goods (FMCG) sectors such as waterresistant sticky labels for beverage bottles and adhesives for carton packaging replacing plastic straps or cling film.

“On the other hand, MAC’s adhesive products are used further upstream, catering to the production of chipboard, particle board, and paper carton packaging.

“MAC is also the sole global producer of microspheres which are tiny and hollow spheres used in the aerospace industry,” the research arm detailed.

All in, they maintain their ‘Outperform’ call for Techbond with an unchanged target price of RM0.45 that is based on 13.5-fold fully-diluted FY25F earning per share (EPS) of 3.3 sen which is in-line with the forward PER of its international peers.