KUALA LUMPUR: BP Plastics Holdings Bhd’s first half ended June 30, 2022 (1H FY22) core profit of RM20.1 million came within Kenanga Research’s forecast at 49 per cent of its full-year forecast.

The company also beat market expectations at 58 per cent of the full-year consensus estimates, the firm said.

Kenanga Research said BP Plastics’ topline had been spared by far from the demand and labour issues, that had affected some of its peers, as manifested in its stable utilisation rate at an average of 65-70 per cent.

“Over the immediate term, its growth will be driven by the commissioning of its tenth cast stretch film line in the fourth quarter (Q4) 2022 (and it is confident that the line will be fully utilised within FY23).

“It has also earmarked coex blown film lines to strengthen the production of food packaging and shipping and logistics packaging film,” Kenanga Research said in a note today.

Kenanga Research said BP Plastics’ average selling prices (ASPs) were likely to be sticky to the downside despite resin prices having softened by 10-12 per cent year-to-date, resulting in better margins, albeit temporarily.

“We roll forward our valuation base year to FY23F to better reflect its growth potential driven by capacity expansion which increases premium products capacity that fetches better margins, and sustainable demand.

Kenanga Research has upgraded BP Plastics to “Outperform” from “Market Perform”, with a higher target price of RM1.63 from RM1.31 previously.

Risks to the rating include sustained higher resin cost, recovery in demand for packaging materials from the pandemic cut short by a global recession, and prolonged labour shortages.