KUALA LUMPUR: NTPM Holdings Bhd is poised to capture the growing demand in Malaysia, as the tissue and hygiene paper market is projected to grow at a compound annual growth rate (CAGR) of 5.7 per cent from 2022 to 2026, Affin Hwang Capital said.
The firm said as Southeast Asia continued its urbanisation trend, it would fare well for NTPM's overseas business.
"We project core net profit to increase between 5.0-15 per cent year-on-year (YoY) in FY23-FY25 attributable to stable sales contributions from the tissue paper and personal care segments as total revenue is projected to increase by 5.0-5.4 per cent over FY23-FY25.
"Moreover, input costs like raw materials, packaging and freight charges are expected to soften moving forward.
"As business conditions improve with the recovery in labour shortage issue, costs of operations are expected to normalise, but partially offset by higher minimum wages and higher costs to employ foreign workers," Affin Hwang said in a note today.
Affin Hwang expects NTPM's core net margin to be flat in FY23 at 2.8 per cent due to higher operating costs and heightened inflationary risk.
"The core net margin is expected to improve slightly in FY24-FY25 at 2.9-3.2 per cent as business conditions improve," it added.
Meanwhile, Affin Hwang said NTPM was looking to allocate an annual capital expenditure of RM15 million for FY23-FY25 to improve its production automation.
The company invested RM300 million between FY19-FY22 to expand its production capacity by 400 per cent and 60 per cent to 50,000 tonnes and 110,000 tonnes in Vietnam and Penang facilities respectively.
"This is expected to reduce its reliance on labour in a rising wage cost environment," it added.
Affin Hwang has initiated its coverage on NTPM with a "Hold" rating and target price of 41 sen.