New stock introduction: Following the growth of the food processing industry, EPB Group's reasonable price can reach 77 cents.

EPB Group, a food and packaging solution provider, plans to be listed on the GEM on August 23, and is highly bullish to continue to expand following the growth of the food processing and packaging machinery industry after listing, and has received a target price as high as 77 cents from the brokerage.

This target price is equivalent to 56 cents, which is 37.50% higher than the initial offering price.

Dazheng Securities introduces this upcoming IPO, stating that this one-stop food industry and packaging machinery solution provider has competitive advantages, including providing one-stop solutions for food processing and packaging machinery, an experienced management team, and compliance with internationally recognized quality standards.

APEX Securities is bullish on EPB Group, believing that the continuous growth in the frozen food market demand, the company's expansion plans to increase production capacity, the integration of robot technology and software development, and its solid foothold in regional markets will all drive its future growth.

Looking ahead, EPB Group plans to expand its business scope in Penang, building a 0.07 million square foot factory including offices, factories, warehouses, and showrooms.

Analysts point out that the company will centralize its operations in this factory to increase production capacity and enhance customer experience.

In addition, EPB Group plans to enhance its robot technology capabilities in line with the trend of Industry 4.0, to meet hygiene requirements and address labor shortages.

For the regional market, MERCURY Securities analysts pointed out that EPB Group has strategic influence in high-growth markets such as the Philippines and Indonesia. Not only do these markets have a large population, but their economic growth and consumer spending are also rapidly increasing.

The governments of these countries also prioritize the food processing industry, which is an expansion opportunity for EPB Group.

In addition, the company also sells products to the United States, Myanmar, and Algeria, accounting for 7 to 10% of the sales.

The revenue for the fiscal year 2023 reached 85.1 million.

Looking back at fiscal year 2023, about 70% of EPB Group's sales came from overseas, reaching 85.1 million ringgit, more than twice the 35.7 million ringgit in fiscal year 2020.

Furthermore, analysts state that the company has a robust balance sheet and a net cash position, holding 31.1 million ringgit in cash.

This will help support its dividend policy after listing, as EPB Group plans to distribute dividends equivalent to a maximum of 25% of net profit.

According to independent market research firm Protege, the compound annual growth rate (CAGR) of Malaysia's food processing and packaging industry is projected to reach 10.4% from 2024 to 2028.

This growth is supported by the increasing demand for convenience food processing, the adoption of automated machinery, and government support for the development of local food-related industries.

Looking ahead, Dazheng Securities predicts that the company's sales growth rate for the fiscal years 2024 to 2026 will reach 10%, 12.0%, and 15.0%, thanks to the continuously growing market size of the food processing and packaging machinery industry.

With the increasing demand for food manufacturing and processing machinery, combined with cost optimization strategies, analysts expect that the company's net profit for the next three fiscal years will grow by 15.3%, 24.9%, and 18.5% respectively.

Considering the company's small market cap, Dazheng Securities gives a target price of 77 cents, which implies a P/E valuation of 14 times, slightly lower than the industry average of 18 times.

APEX Securities and MERCURY Securities have given target prices of 66 cents and 75 cents respectively.