SCIENTX (4731): SCIENTEX BHD's turnover to shoot up to RM6bil in 2024, says Affin Hwang

SCIENTX (4731): SCIENTEX BHD's turnover to shoot up to RM6bil in 2024, says Affin Hwang

Scientex Bhd’s revenue is expected to increase to RM6 billion in the financial year 2024 (FY24), said Affin Hwang Capital.

KUALA LUMPUR: Scientex Bhd's revenue is expected to increase to RM6 billion in the financial year 2024 (FY24), said Affin Hwang Capital.

The firm said this was likely coming from a recovery in export sales due to the re-opening of the global economy and increasing contribution from the property segment from new launches in the affordable housing market.

"Besides, active management efforts to mitigate the increasing costs of raw materials as well as the challenging operating environment amid Covid-19 will also help in the company's growth.

"With that, we are forecasting core earning per share (EPS) compound annual growth rate (CAGR) of 11 per cent for FY22-FY24 with resilient operating margins," it said.

Affin Hwang believes raw material costs like fossil-fuel resins account for around 70-80 per cent of Scientex's manufacturing costs of sales.

With this, the company may see some operating margin compression within the manufacturing segment in the near-term to reflect the rising costs of raw materials.

Even then, the firm said Scientex did adopt a costs-plus approach for its stretch films.

Other than that, it said the company was able to pass on the costs to its clients after a few months for its other packaging products.

"Note that the low density polyethylene (LDPE) Southeast Asia spot price has increased to US$1,560 per tonne as of end January-2022.

"Therefore, we forecast the earnings before interest and taxes (EBIT) margin for the packaging segment to come down slightly to 9.0 per cent for FY22 from 10.2 per cent in FY21, but it should be relatively well preserved, as in the past," it said.

Following slight changes to its FY22-FY24 EPS, Affin Hwang has fine-tuned its target price (TP) to RM5.20 from RM5.15.

"We reiterate 'Buy' call for Scientex with higher TP of RM5.20. Scientex is a country top pick.

"Key downside risks to our call include lower-than-expected export sales from the packaging segment, higher-than-expected resin prices and lower-than-expected take-up rates for new property launches," it added.

https://www.nst.com.my/business/2022/02/770209/scientexs-turnover-shoot-rm6bil-2024-says-affin-hwang