Kenanga Research said the upward momentum in sales should sustain into the second half of the year.
PETALING JAYA: Players in the plastic packaging space have guided for stronger flow of orders over the immediate term, driven by customers’ restocking activities ahead of price hikes stemming from rising resin prices, says Kenanga Research.
The research firm said the upward momentum in sales should sustain into the second half of the year.
Additionally, companies in the space are seeing overwhelming response to their sustainable packaging materials.
The research firm noted that local players have gained market share from their overseas peers, capitalising on lower energy costs and innovative products such as nano stretch film and mono film that tick the sustainability box.
“We upgrade our sector call to ‘overweight’ from ‘neutral’. According to KPMG, the global plastic packaging market is projected to grow at a 5% compound annual growth rate from 2021 to 2026,” it said in a sector report.
According to Kenanga Research, SLP Resources Bhd
has been drawing in new customers, particularly in Asean, for its mono film, fuelled by the growing preference towards sustainable packaging and the stricter packaging waste regulations in Europe and Vietnam.
“Some companies have strategically expanded their capacity in high-margin premium stretch film and blown film products in recent years.
“Thong Guan Industries Bhd, for instance, commissioned its ninth nano stretch film line in financial year 2023, whereas BP Plastics Holding Bhd also introduced its ninth and tenth cast stretch film machines in December 2021 and December 2022, respectively.”
However, Kenanga Research said there could be downside risk to margins due to rising operating and freight costs amid the escalating Red Sea conflict.
