Equity Analysis /
Thailand

SCG Packaging PCL: Thailand: Packaging - Short-term margin squeeze, to fatten thereafter

  • Strong demand for consumer-linked packaging and pulp in 4Q22

  • Weaker packaging paper demand in short-term, recovery expected

  • Short-term margin squeeze, to fatten thereafter

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Follow
Bualuang Securities
21 December 2022

Weaker demand in China has dampened demand for packaging paper, squeezing margins in the short-term. Nevertheless, the improving demand tied to easing of China’s lockdowns and lower cost factors should boost margins thereafter. SCGP is our preferred pick.

Strong demand for consumer-linked packaging and pulp in 4Q22  

The economic reopening of Thailand and other ASEAN countries has continued to boost demand for packaging products and pulp through 4Q22. Even though the prevailing global economic slowdown has adversely affected the demand for discretionary goods/durable goods to some extent, the demand for consumer-linked products like F&B, FMCG, pet food has sustained resilient. The strong broad demand improvement has pushed the short-fiber pulp price up by 50% YoY to US$855/t (stable QoQ) in Oct-Nov 2022.