SFLEX: Expansion Plans Begin to Take Shape, HOLD for Now

We upgrade our recommendation to a HOLD from SELL on SFLEX based on an increased target price of Bt5.50, implying a downside of 7% from the current price. We derive our target price from a DCF-based valuation using a WACC of 6.7% and a terminal growth rate of 4%.

Investment thesis:

• Demand shift towards flexible plastic packaging drives growth prospects
• Continued capacity expansion to meet the growing demand
• Broadening product spectrum to attract customers from other industries

Interim: In 1Q21, SFLEX continued to deliver strong results, confirming its growth prospects. While the results were in line with our forecast, we are positively surprised by the expansion speed. Hence, we increase our revenue forecast from 2022 onward.

Risks: Reliance on four major customers, fluctuations in raw material prices, high inventory turnover, and intense price competition in the packaging industry.