KUALA LUMPUR: Zantat Holdings Bhd, slated to be listed on the ACE Market of Bursa Malaysia on March 27, 2024, is strategically positioned to capitalise on escalating demand for plastics in India, says Hong Leong Investment Bank (HLIB) Research.
Zantat is a producer of ground calcium carbonate (GCC), which is mainly used as fillers to produce plastic masterbatch followed by rubber glove manufacturing, PVC pipe and cable manufacturing, and others.
The group is poised to capitalise on the favourable GCC demand outlook in the Indian market by adding one production line for fine-grade coated GCC in its Clarock Perak plant by 2024.
According to HLIB, the expansion will increase its GCC annual production capacity by 26,000 tonnes, equivalent to 8.3% of the total capacity.
About 43% of the group's sales are attributed to India's plastic industry, which is forecast by the All India Plastics Manufacturers Association (Aipma) to exerience a tripling in market size from INR3.5 lakh crore (US$42.4bil) in 2022-23 to INR10 lakh crore in 2027-28.
"This surge will be fuelled by both domestic and export markets, driven by factors such as rapid population growth, rising income levels, and increased global recognition of Indian products," said HLIB in a report.
There is also a new growth avenue for the group as it makes its foray into producing ultra-fine GCC and venturing into downstream operations.
Production lines for bioplastic compounding with an annual capacity of 300 tonnes, were installed and is scheduled to commence operations in 1Q24.
HLIB said this compound has obtained the 'OK compost INDUSTRIAL' certification from TUV Austria Cert GmbH, affirming its biodegradability in industrial composting facilities.
"Overall, we see huge potential in this venture amidst growing environmental concerns and regulations surrounding single-use plastics," said HLIB.
Given these factors, the research firm projects Zantat's core profit after tax to register a strong FY22-25 compounded aggregate growth rate (CAGR) of 18.4%.
It assigned a fair value of 36 sen a share based on 12x price-earnings (PE) of FY24F three sen, which aligns with the average FY24F PE of Malaysia's plastic converters.
