KUALA LUMPUR: BP Plastics Holding Bhd may face near-term challenges due to weak demand for industrial packaging amid the global economic slowdown.
PublicInvest noted that, although a stronger ringgit signals economic stability, it may reduce BP Plastics' competitiveness in exports.
"As the group's export products are priced in US dollars, a stronger ringgit also means lower earnings when converting foreign revenues back into local currency," it said in a note.
Nonetheless, Public Investment Bank Bhd (PublicInvest) is confident in the company's long-term prospects following a recent meeting with its management.
PublicInvest noted that the company's growth is expected to be driven by a megatrend toward sustainable and eco-friendly flexible packaging.
"We trimmed our financial year 2025 and financial year 2026 (FY25/FY26) forecast by 12 per cent to account for the slower than expected demand recovery," the note said.
PublicInvest also said that labour costs currently account for about 5.0 per cent of total production expenses.
"We estimate that the revision of the new minimum wage, along with the introduction of mandatory foreign worker contribution to the EPF, will impact approximately 2 per cent of its annual net profit for FY25/FY26," it added.