KUALA LUMPUR (May 17): Evergreen Fibreboard Bhd's share price surged 7.41% to 43.5 sen today, its highest since December 2020.

As at 11.20am, 7.14 million shares had been traded while its market capitalisation stood at RM368 million.

Hong Leong Investment Bank Research (HLIB Research) has upgraded the engineered wood-based products manufacturer's core net profit forecasts for financial year ending Dec 31, 2021 (FY21) from RM7.7 million to RM21.1 million and for FY22 from RM14.6 million to RM33.4 million to account for stronger demand, higher average selling prices (ASP) and lower operating costs.

In a report, the local research house has maintained its "buy" call and raised its target price for Evergreen Fibreboard's counter from 65 sen to 68 sen on the back of an unchanged price-to-book ratio of 0.5 times based on FY21 book value per share.

In its report today, HLIB Research noted that despite higher raw material and freight costs due to less shipment to export markets, Evergreen Fibreboards's earnings are likely to be sustained by strong demand for the group's products and higher ASP. 

The group, which announced its financials for the first quarter ended March 31, 2021 (1QFY21) yesterday, recorded core net profit of RM7.5 million, making up 97.4% of HLIB's forecast for FY21. This marked a turnaround for Evergreen Fibreboard as it had been in the red, with a core net loss of RM6 million in 4QFY20. 

The group highlighted an increase in revenue due to higher sales volume and ASP in Indonesia (+18.8%) and Malaysia (+16.9) for panel boards are offset by Thailand (-19.2%) due to shipment delays causing lower sales volumes.

HLIB Research remains positive due to the local furniture industry boom with a strong demand and order book visibility of two to seven months across all product segments. In addition, the group mitigated the impact of elevated freight costs by shifting some of its supply of panel boards from export markets to the regional markets in Malaysia and Indonesia.