DAIBOCI (8125) : Daibochi Plastic & Packaging - F&B gets a bad wrap
Target RM4.75 (Stock Rating: ADD)
Daibochi’s 9M14 net profit, at 78% of our full-year forecast, was 17% below our and market expectations, mainly due to a slowdown in the F&B sector during 3Q. However, demand recovered from early 4Q onwards. We cut our FY14 EPS to reflect slower sales and higher operating costs but maintain FY15-16 numbers. With the year-end approaching, we roll forward our P/E target of 13x (based on sector) to CY16, which raises our target price to RM4.75. We upgrade the stock from hold to Add. Potential catalysts include more major export orders and a further decline in raw material prices.
9M14 net profit down 13.6% yoy
Despite a 13.2% yoy rise in 9M14 revenue, Daibochi saw net profit slippage of 13.6%. Interim DPS was 2.5 sen, slightly below our expectations. YTD DPS is 9.5 sen, working out to a payout ratio of 65%. The drop in 9M14 net profit resulted mainly from higher costs, a 17% hike in electricity tariff at end-2013 and higher polyester and polyethylene resin & film prices. Worth noting is the 4.8% qoq fall in 3Q14 revenue, indicative of a slowdown in the F&B sector during the quarter. In the last briefing, Daibochi had already indicated to us that local F&B customers had been seeing some signs of a slowdown since Jun. However, this phase was temporary as demand recovered from Sep onwards.
Benefiting from lower raw material prices?
The sharp fall in crude oil price could be positive for Daibochi as it could mean lower resin and plastic raw material prices, which would be significant as raw materials make up 60% of production costs. Management’s view in the last quarter was that raw material prices had been too high over the past year and it was looking for prices to fall. Crude oil prices are down 20% since Jul and if prices continue to decline, it would surely be positive for Daibochi.
Export to drive topline growth
ASEAN and Australia are markets that offer strong long-term potential. Daibochi’s topline has been strong over the past year, particularly from export markets. If all goes well, Daibochi should be getting more major export orders next year. In addition, the company could soon take some market share away from its peer, Tomypak Holdings as customers are uncertain about Tomypak’s management in view of the recent shareholding changes in the company.
Source: CIMB Daybreak - 23 October 2014
Target RM4.75 (Stock Rating: ADD)
Daibochi’s 9M14 net profit, at 78% of our full-year forecast, was 17% below our and market expectations, mainly due to a slowdown in the F&B sector during 3Q. However, demand recovered from early 4Q onwards. We cut our FY14 EPS to reflect slower sales and higher operating costs but maintain FY15-16 numbers. With the year-end approaching, we roll forward our P/E target of 13x (based on sector) to CY16, which raises our target price to RM4.75. We upgrade the stock from hold to Add. Potential catalysts include more major export orders and a further decline in raw material prices.
9M14 net profit down 13.6% yoy
Despite a 13.2% yoy rise in 9M14 revenue, Daibochi saw net profit slippage of 13.6%. Interim DPS was 2.5 sen, slightly below our expectations. YTD DPS is 9.5 sen, working out to a payout ratio of 65%. The drop in 9M14 net profit resulted mainly from higher costs, a 17% hike in electricity tariff at end-2013 and higher polyester and polyethylene resin & film prices. Worth noting is the 4.8% qoq fall in 3Q14 revenue, indicative of a slowdown in the F&B sector during the quarter. In the last briefing, Daibochi had already indicated to us that local F&B customers had been seeing some signs of a slowdown since Jun. However, this phase was temporary as demand recovered from Sep onwards.
Benefiting from lower raw material prices?
The sharp fall in crude oil price could be positive for Daibochi as it could mean lower resin and plastic raw material prices, which would be significant as raw materials make up 60% of production costs. Management’s view in the last quarter was that raw material prices had been too high over the past year and it was looking for prices to fall. Crude oil prices are down 20% since Jul and if prices continue to decline, it would surely be positive for Daibochi.
Export to drive topline growth
ASEAN and Australia are markets that offer strong long-term potential. Daibochi’s topline has been strong over the past year, particularly from export markets. If all goes well, Daibochi should be getting more major export orders next year. In addition, the company could soon take some market share away from its peer, Tomypak Holdings as customers are uncertain about Tomypak’s management in view of the recent shareholding changes in the company.
Source: CIMB Daybreak - 23 October 2014
