KGI Securities notes in its report that, with rising optimism over possible resolutions in the US-China trade war, SCG Packaging Public Company Limited (SET: SCGP) appears to be weathering the storm effectively, with market uncertainty having largely been factored into the current stock valuation.
This backdrop has created an environment where demand, projected to be inflated in the second quarter of 2025, is anticipated to stabilize, resuming regular levels in the latter half of the year.
SCGP has been proactive in facing these challenges, strategically expanding into South Asian and Middle Eastern markets, outsourcing to low-tariff zones such as Turkey and Europe, alongside boosting market presence domestically and intensifying cost-cutting measures.
The company’s domestic market revenue surged to 45% of total revenues in the first quarter of 2025, a rise from 42% the previous year, while revenue from ASEAN countries, excluding Thailand, saw a slight decrease to 33% from 35% seen in 2024.
In light of these developments, KGI has upgraded SCGP’s earnings forecasts from 2025 to 2027 by 6-13% to account for reduced interest costs and an improved gross profit margin from effective cost management despite lower sale prices.
Predictions for the 2025 core profit is now 4% above market consensus, with 2026-2027 expectations adjusted to reflect a 13-15% discrepancy below consensus. However, profit in the second quarter is projected to grow sequentially, buoyed by ongoing restocking and stable profit margins.
Third and fourth-quarter profits are anticipated to benefit further from reinforced domestic sales, continued cost savings, and decreased interest expenses at Fajar following SCGP’s capital injection, which is projected to save approximately THB 300 million annually.
SCGP reported a robust first-quarter net profit of THB 900 million, which significantly improved from a net loss experienced in the previous quarter. Although year-over-year profit declined by 48%, the results outperformed the analyst’s forecasts by 32%, driven largely by higher-than-anticipated packaging sales and manageable material costs.
Core profit for the period reached THB 916 million, marking a substantial 26-fold increase from the previous quarter, though it was down 46% compared to the same period last year, accounting for 24% of KGI’s full-year projection.
The quarter-on-quarter rise was driven primarily by the removal of a THB 260 million inventory adjustment, increased sales volumes—especially in packaging paper—and reduced operating costs. On a year-over-year basis, earnings dropped due to suboptimal operations and the full-year impact of losses at Fajar.
The analyst remains optimistic for SCGP, maintaining an ‘Outperform’ recommendation with a revised target price of THB 16.00 per share, an increase from THB 13.80. The ongoing trade discussions between the US and China have bolstered market confidence, reducing perceived risks and enhancing potential rewards for investors.
SCGP’s rapid strategic maneuvers have effectively cushioned against downside risks more successfully than anticipated. This level of adaptability may pave the way for further short-term revaluation, particularly as SCGP’s shares are currently trading at a discount compared to its global counterparts.
