KSS Upgrades SCGP Target Price to Bt65 on Strong Integration Strategy

Krungsri Securities (KSS) has given a “BUY” recommendation on SCG Packaging Public Company Limited (SCGP) with a target price revised up to ฿65.00/share.

 

KSS stated that testliner paper spreads have softened QoQ, but still remain healthy and in line with the 2020 average at US$248. Meanwhile, sales volume should soften in 2Q due to long holidays in Thailand and Indonesia. KSS expected softened spreads and sales volume to pressure earnings from packaging paper (52% of revenue in 1Q).

Nevertheless, KSS expected cross-selling and integration strategy should create greater synergies in FY22. Duy Tan and Intan deals will be closed in 3Q21. KSS forecast SCGP’s EBITDA margin to reach 18.7%, 20.6% and 21.5% in 2021-23 to reflect synergy benefits from its integration.

KSS estimated SCGP’s earnings to increase 9% and 15% in 2021-2022, giving a BUY recommendation with a DCF-based target price revised from Bt60 to Bt65 per share.