Maybank Upgrades SCGP to “BUY” as Earnings Recovery Continues

Maybank Securities forecasted on Wednesday that SCG Packaging (SCGP) would maintain its recovery momentum and drive earnings growth further from the second quarter onwards as economic activity in the Southeast Asia region (ASEAN) improves in line with the recovery of Thailand’s domestic consumption.

SCG Packaging Pcl. (SET: SCGP) saw its rating at Maybank Securities (Thailand) (MST) rise from “hold” to “BUY” given its better-than-expected earnings in the first quarter of 2023, with 2Q23 likely to continue its recovery and 2H23 outperforming 1H23. 

In 1Q23, SCGP reported a net profit for the period of THB1,220 million (-26% YoY and +171% QoQ) with a net profit margin of 4%. The QoQ increase in profitability was attributed to the gradual recovery of packaging’s sales volume with rising demand in the ASEAN market, surging tourism and service sectors, China’s reopening, cost reduction, and strategic business expansions through M&P (Merger & Partnership), which bolstered overall operations. 

For the full year, Maybank forecasts sales of THB157.404 billion, up 8% year over year, and core profit of THB6.596 billion, up 14% year over year, keeping its target price for SCGP at THB19.0 per share with 11% upside.

“Over the long term, SCGP’s earnings should continue to grow, driven by domestic and international business expansion, an integrated packaging solutions strategy, and integration within the value chain. Strong quarterly earnings are potential catalysts,” Maybank said in a note released on Wednesday.