BP Plastics to see sustain demand recovery in 2024 and 2025

KUCHING: Plastic packaging manufacturer BP Plastics Holding Bhd (BP Plastics) is expected to see sustained demand recovery in 2024 and 2025.

In a company update on March 12, the research arm with Kenanga Investment Bank Bhd (Kenanga Research) recently came away from a post-results engagement with BP Plastics feeling upbeat on its outlook.

The group’s management team is anticipating the pick-up in demand for plastic packaging which started in the second half of 2023 (2H23) to sustain well in 2024 and 2025, supported by various factors.

Most notably, the strong revival in both business and leisure travelling is expected to generate higher demand for plastic packaging used for transportation and storage purposes.

“For financial year 2024 (FY24), BP Plastics is targeting sales volume to grow by 8 to 10 per cent year on year (y-o-y) for both domestic and overseas buyers,” the research arm shared.

The group’s revenue and earnings are also expected to expand at a wider rate due the group’s shift towards a higher margin product mix that includes thinner gauge stretch film for the burgeoning sustainable packaging market and technical customised blown film from its new co-extrusion blown film machines that were recently commissioned at the end of 2023.

“We believe BP Plastics’ nano stretch film has a strong competitive edge in the US and European US markets given the high cost structure, particularly, energy cost of the local producers there,” the research arm added.

Additionally, the plasticmaker also anticipated lower inputs in the medium to long-term as the research arm notes that the group’s planned RM35 million capital expenditure (capex) in FY24 will mostly go to strategic investments for efficiency.

This includes new printing and cutting machines that will come on line in 2H24 which will boost margins, additional solar panels to further reduce electricity costs, and upgrading of the power supply system to further driven down costs.

With a renewed sense of optimism for the group’s outlook in terms of improving demand and margins, Kenanga Research guides that they have decided to raise their call on BP Plastics from ‘Market Perform’ to ‘Outperform’.

They also raise their FY24 and FY25 earnings forecasts for BPPLAS by 4 and 3 per cent to RM40.1 million and RM46.3 million, respectively.