HPP Holdings back on investors’ radar despite poorer results

HPP’s share price could continue its upward trajectory after rebounding from a low of 34 sen on Aug 5. The counter closed 5.14% higher to 41 sen on Sept 12. Investors like HPP probably on the back of consensus’ expectations of the company being able to post rising yearly earnings trend.

The one-stop printing and packaging solutions provider, posted a 29% year-on-year decline in net profit to RM2.3 million in 4QFY24. On a full year basis, its financial year ended May 30, 2024 saw its bottomline being slashed by 56% y-o-y to RM4.1 million.

Despite the drop, consensus estimated HPP to show net profit of RM7 million in FY25 before rising to RM9.6 million in FY26. Valuation-wise, this translates to prospective price earnings ratios of 21.6x and 15.8x, respectively.

HPP is involved in the printing, production as well as sales and marketing of paper-based packaging (both corrugated and non-corrugated) and trading and production of rigid boxes.

Analysts expect the company to record better results in FY25, judging from early signs of recovery in terms of orders from the electronic and electrical segment. HPP’s earnings drivers include generally higher paper product prices globally that should lift its average selling prices.

In addition, the average selling prices of could improve with the introduction of its new high-margin recyclable paper pulp moulded packaging products, and a pick-up in orders, particularly from clients in the E&E segment on restocking and new product launches. Also, the consumer E&E segment has bottomed out and is showing early signs of recovery.

Analysts continue to like HPP for its globally recognised G7 Master Colourspace certification that enables it to establish a strong footing in the supply chain of MNCs, providing design, multi-colour and high-resolution offset or flexographic printing solutions,.

The company also has a strong customer base including Customer D, and (iii) its new recyclable paper pulp moulded packaging products, a substitute to Styrofoam packaging products, that comply with stringent EU environmental standards.

Sentiments on HPP are quite positive but these could only become more meaningful if it could deliver more consistent profits.