Analysts maintain their OVERWEIGHT call for the plastic sector, pointing to the sector’s greater economies of scale and innovative solutions utilising sustainable packaging materials, in response to heightened ESG standards locally and globally. (ESG: Environmental stewardship, Social Responsibility and Governance Excellece)
Over the long term, backed by lower cost owing to greater economies of scale and product innovation especially towards sustainability, local players are aiming for larger market shares from overseas producers, according to Kenanga Investment Bank Berhad.
Local plastic packaging players should see sustained demand entering into the last quarter of 2024 (4Q24), underpinned by recovery in manufacturing, albeit modest and year-end consumer spending.
Kenanga Research’s sector top pick is Thong Guan Industries Bhd with a target price of RM2.86.
As at 10:00am, Thong Guan’s shares traded at RM1.58. (Stock updates from www.klsescreener.com)
The Environmental Directorate of the Organisation for Economic Co-operation and Development (OECD) projects that plastic packaging usage will triple by 2060 from the current level.
The OECD works with over 100 countries to promote policies that enhance economic and social well-being. Its Environmental Directorate, on the other hand, helps governments design and implement effective policies to address environmental issues, sustainably manage natural resources, and foster green growth.
Separately, the global packaging market is also set to grow at around 4% CAGR (Compound Annual Growth Rate) to reach USD1.4 trillion by 2028 with flexible plastics likely to grow faster at 5% CAGR, outpacing metal, glass and even slightly ahead of paper-based packaging. The popularity of flexible packaging is driven mainly by its durability, flexibility, and cost-effectiveness.
Environmentally, once the energy requirement and emission linked to the transportation or recycling of heavier metal or glass packaging are taken into consideration, the case for plastic packaging is even stronger.
