KUALA LUMPUR (Nov 3): Kenanga Research has initiated coverage of HPP Holdings Bhd (HPPHB) with an “outperform” rating at 40.5 sen and target price (TP) of 46 sen based on FY23 PER of 13 times, at a premium to the average forward multiple of its universe of manufacturing stocks of 11.8 times.

In a note on Thursday (Nov 3), the research house said the rating reflects: i) the strong growth prospects of the consumer electronics industry that is the main costumer of HPPHB’s printed packaging materials; ii) HPPHB, armed with a globally recognised G7 Master Colourspace certification, has carved itself a strong footing in the supply chain of MNCs, providing design, multicolour and high-resolution offset or flexographic printing solutions; and iii) its enviable client base with prestigious names such as Customer D that speaks volume for its proven product and service quality.

“Risks to our call include: i) volatility in the cost of inputs, particularly paper pulp; ii) its customer concentration; and iii) recovery in demand for packaging industry from the pandemic cut short by a global recession,” it said.