KUALA LUMPUR (May 27): Shares in BP Plastics Holding Bhd (KL:BPPLAS) nearly erased this month’s gain, after the packaging company reported an 8.1% year-on-year decline in net profit for the first quarter.

BP Plastic fell as much as 10.50% or 16.1 sen to RM1.37 on Monday, its lowest since April 30. The stock ended the day at RM1.39, still lower by 14 sen or 9.15% after 1.25 million shares traded, valuing the company at RM391.26 million.

All three analysts tracking BP Plastics have rated the counter as a “hold”, following the lackluster earnings for its first quarter ended March 31, 2024 (1QFY2024), which largely missed market expectation — core net profit of RM7.4 million came in at approximately 19% of the full-year consensus estimate.

Kenanga Research, which downgraded BP Plastics to “market perform”, said while it remains optimistic on the company, the counter still already has “fair valuations after the recent share price run-up”. 

BP Plastics, one of the largest stretch films and polyethylene flexible plastics packaging manufacturers in the country, has seen gains more than double so far this year, amid its strong foothold in the Southeast Asia market.  

Kenanga Research anticipates BP Plastics, with its low-cost structure, to gain more market share from its overseas peers, due to increased demand for plastic packaging.

“BP Plastics commissioned two new co-extrusion blown film machines at the end [of] FY2023, expanding its total nameplate capacity by 9,600 MT (metric tonnes)/year or 7%, to 147,600 MT/year,” Kenanga said. These machines can produce various plastic products, including sugar bags, flour bags, oil bags, lamination film, shrink film and stretch hood, it noted. 

On Friday (May 24), BP Plastics reported to Bursa Malaysia that its net profit for 1QFY2024 came in 8.1% lower year-on-year (y-o-y) at RM7.62 million, against RM8.30 million a year earlier, due to increased production costs and tax rate.  

Quarterly revenue, however, grew 5.87% to RM124.22 million, from RM117.33 million in 1QFY2023, thanks largely to higher demand for its product from both the local and export markets, which was supported by the improved orders for its nano stretch film, known for its thinner yet stronger properties.  

The company has declared a first single-tier interim dividend of 1.5 sen per share, payable on July 12.

On its part, BP Plastic said it will focus on business expansion; pursue innovation, product quality and differentiation; enhance operational efficiency and cost management, and emphasise its commitment towards environmental, social  and governance (ESG) and sustainability objectives.