HPP Holdings (HPPHB) reported better-than-expected FY24 results despite a 56% year-on-year decline in core net profit, primarily due to weak orders and higher operating costs. The company's revenue fell by 15% year-on-year, affected by underperformance in non-corrugated packaging and rigid boxes, although corrugated packaging showed growth. However, signs of recovery in the electronic and electrical (E&E) segment suggest a potential turnaround in FY25.

Kenanga Investment Bank (Kenanga) maintains a MARKET PERFORM rating for HPPHB but has raised its target price by 22% to RM0.39 from RM0.32. The bank highlights HPPHB's improved order volume and higher paper product prices, along with new high-margin recyclable packaging products, as key factors for potential growth.

The bank's updated forecast reflects expectations for a recovery driven by increased orders and better margins, though it maintains its forecasts for FY25 while introducing figures for FY26. The new target price, based on an unchanged 13x price-to-earnings ratio (PER), acknowledges HPPHB's niche strength and strong client base despite the current challenges.

Investors should note that while HPPHB's short-term profitability remains inconsistent, the anticipated recovery in the E&E segment and the company's innovation in recyclable packaging could offer future upside. The bank's cautious optimism reflects the potential for improved performance and growth opportunities in the coming fiscal year.