PETALING JAYA: Scientex Bhd is expected to continue to face headwinds in terms of high raw material prices after reporting quarterly results that were heavily impacted by costs.
The plastic packaging manufacturer and property developer also has a lower property launch target for its financial year 2022 (FY22), which is a setback, according to RHB Research.
However, the research house expects an improved performance from the property segment.
“In H1FY22, a total of RM410mil worth of properties was launched in Penang, Melaka, and Johor. The group is targeting 24 more launches in H2FY22,” the research house said in a report.
Scientex posted a 16.5% drop in net profit to RM93.69mil for the second quarter ended Jan 31, from RM112.17mil a year earlier, dragged down by rising material prices and freight costs.
However, the group recorded a 5% jump in revenue to RM952mil compared with RM906.55mil previously, thanks to higher demand for plastic packaging products.
Despite the commendable top line growth, Scientex reported Q2FY22 results were below consensus expectations due to elevated costs of raw materials and freight which impacted earnings, according to RHB Research.
Nonetheless, “in the midst of the tough operating landscape, its risk-reward profile has managed to turned favourable following a 20% de-rating in recent weeks, “ it said.
The research house has, hence, upgraded Scientex’s stock to a “buy” from “neutral”.
On its plastics segment, it noted that a new stretch film plant was coming online in the second half of this year.
“Scientex’s new robotics stretch film plant – the first of its kind in Asia – will commence operations in a few months with a capital expenditure of RM80mil.
“The plant will initially be installed with two fully automated production lines which should improve the group’s manufacturing efficiency, productivity, and add an industrial stretch film capacity of 1,500 tonnes/month,” it said.
“We adjust our FY22-FY24 earnings by minus 10%, minus 8%, and minus 3% to account for the high raw material prices that should remain elevated for the year, and the lower property launch target,” RHB added.
Scientex said it expected global economic conditions to remain challenging in view of the ongoing geopolitical tensions.
“Potential downside risks such as rising Omicron infections or the discovery of new pandemic variants, supply chain disruptions and rising global energy prices are additional factors which could derail global economic recovery,” it added.
In its report on the company, Kenanga Research also said it was reducing Scientex’s FY22 core net profit by 4% due to higher raw material and logistic costs limitations.