SLP Resources' 3QFY24 net profit declined by 41.8% YoY to RM1.6m, as the Group's business continue to be affected by supply-demand imbalance in the industry. The cumulative 9MFY24 net profit of RM9.8m was below both our and consensus estimates, accounting for 54.4% and 56.2% of the full-year forecast, respectively. The discrepancy in our numbers was mainly due to slower than expected demand recovery and higher than expected operating costs. We are ceasing our coverage on SLP Resources due to absence of re-rating catalyst, the completion of our commitments under Bursa RISE as well as reallocation of resources to widen sector coverage. Our last recommendation is Neutral, with PE-based TP of RM0.86.

• Results review. SLP Resources' 3QFY24 revenue fell by 7.9% YoY to RM38.4m, as domestic market reported weaker sales, although this was partly offset by better revenue in the Japan and Australia markets. The Group's net profit decreased by 41.8% YoY to RM1.6m, due to lower revenue and higher operating costs. As a results, the Group's operating profit margin fell by 5.5ppts to 2.0%.
• Outlook. The flexible plastic packaging industry continues to grapple with a supply-demand imbalance and elevated production costs. We foresee SLP Resources' outlook to remain challenging, mainly due to the subdued demand recovery and weak industry dynamics. In addition, the stronger Ringgit and higher operating cost from the revision of the new minimum wages, as well as the introduction of mandatory foreign worker contribution to the EPF, announced recently under Budget 2025, are expected to further aggravate the already thin margins.

Source: PublicInvest Research - 11 Nov 2024