SCGP proven to be strong player in packaging industry, says analyst

Share price of SCG Packaging PCL (SCGP) rose 5.13 per cent to trade at 41 baht per share with a transaction value of over 2.24 billion baht during intermission on Thursday, as investors were optimistic about the company’s sustainable growth.

SCGP, a subsidiary of The Siam Cement PCL (SCG), is a leading packaging provider, operating more than 40 facilities across five ASEAN countries — Thailand, Vietnam, Philippines, Indonesia, and Malaysia.

The heavy trade volume in the morning session brought SCGP to stand as one of the most traded stocks of the day.

Wattana Punyawattanakul, an analyst at TISCO Securities, said that SCGP was in an ideal position to capture the thriving growth of the packaging industry and high potential of the ASEAN market.

According to a TISCO research, the packaging industry’s growth has outstripped that of the broader economy. Frost & Sullivan projects a 5.8 per cent CAGR for packaging demands in ASEAN between 2019-24.

“The high regional growth rate has been [and will continue to be] driven by population growth and rise in purchasing power, urbanization and lifestyle changes, and the evolution of e-commerce.” said Wattana.

Strong profile

TISCO has initiated SCPG coverage with a ‘Buy’ rating with the target price of 47 baht per share, based on a 2021e EV/EBITDA of 12x — within the 6.4-12.8x range of global diversified packaging peers.

The ratio implies a P/E of 24x, compared to 7.6-50.6x for global peers which reflects the company’s position in emerging geographical areas and its room for improvement.

The analyst also said that SCGP has proven that it can deliver stable, yet superior margins compared to other international packaging firms thanks to its ‘T-model’ strategy and solid customer management platform.

“We expect SCGP to achieve a 19% earnings CAGR for 2019-22e, well above the 7 per cent average for global packaging peers.” said Wattana.

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