KUALA LUMPUR: Public Investment Research has maintained its Neutral call on NTPM Holdings Bhd with a target price of 71 sen, based on 14x multiple to FY18E EPS of 5.1 sen. 

NTPM’s 1QFY18 net earnings is broadly in line at RM12.1m (+29.2% y-o-y,+35.4% q-o-q), which accounts for 21% of our full year estimates. 1QFY18 revenue was RM176.2mil, up 16.3% y-o-y. The higher revenue was driven by sales of both tissue and personal care products, meeting 25% of our FY18 revenue forecast.

"Operating, pre-tax and net margins each improved by one percentage point YoY. Overall, we foresee a steady recovery in earnings for FY18 as we expect NTPM to keep focusing on driving sales while improving margins," it said in a research note on Monday.

NTPM's paper products saw revenue jump 17.7% y-o-y to RM124mil for Q1FY18. Profit before tax (PBT) increased 31.2% y-o-y to RM14.2mil while PBT margin for the segment improved to 11.4% for Q1FY18 from 10.3% in the same period last year. 

"Going forward, NTPM is focusing on increasing its tissue paper production in meeting demand in local and regional markets, through the addition of 2 tissue paper machines in its Ho Chi Minh plant, and 1 tissue paper machine in its Penang plant. 

"That said, we are looking at an increase of 40,000MT/year from current 10,000MT/year capacity and additional 20,000MT/year from 100,000MT/year in each Vietnam and Penang plant respectively, which translates to c.50% added capacity to current production level. Given no hiccups in the expansion plan and continuous demand of its products, it should support progressive increase in sales in the longer term."

In the personal care products segment, sales for the quarter grew to RM52.1mil, up 13.3% y-o-u while PBT improved bu 15.3% y-o-y to RM3.7mil, supported by stronger PBT margin of 7.1%, up by 12 basis points from 6.9% in Q1FY17.

"Despite the challenging retail landscape amidst cautious consumer spending in Malaysia, NTPM will remain committed in generating higher sales of baby diapers while working on reducing overall production costs for this segment," says PublicInvest Research.