Highlights

• Demand is expected to recover following the floods in Thailand and inventory build-up ahead of the New Year festive season in Thailand, Vietnam and Indonesia. Continued selling price increases should help mitigate the impact of higher production costs.
   
• SCGP reported a net profit of Bt2.03b, down 12% qoq but up 113% yoy, in line with both our and consensus estimates.
   
• Fajar continues to deliver strong earnings, supporting our unchanged 2026 forecast for SCGP to return to profitability for the first time in four years.
   
• Maintain BUY. Target price: Bt43.00.
   

Analysis

• The tone at the meeting with SCG Packaging (SCGP) was positive.
   
• Demand recovery to support earnings, while higher costs remain a key risk. We expect SCGP’s 4Q26 earnings to benefit from recovering demand following the floods in Thailand, year-end consumption, and inventory restocking ahead of the New Year festive season. Demand should also be supported by preparations for Tet in Vietnam and Hari Raya in Indonesia, with these seasonal tailwinds extending into 1Q27. However, higher raw material costs, particularly recycled containerboard (RCP), and rising energy costs since 2Q26 are expected to limit earnings upside. We forecast 4Q26 net profit of Bt1.8b, down qoq but significantly higher yoy from Bt1.21b in 4Q25, supported by continued selling price increases throughout 2026 and greater use of locally sourced RCP and biomass to reduce production costs.
   
• Fajar to sustain profitability. We expect Fajar to remain profitable in 4Q26, supported by year-end festivities that stimulate demand for F&B packaging. Fajar will continue to focus on the domestic Indonesian market while exploring new regional markets with strong demand, particularly India and other South Asian markets. Cost-saving initiatives include sourcing RCP locally and improving energy management. Fajar is also studying upgrades to its duplex paper production machinery and pursuing mergers and partnerships with packaging box manufacturers to increase the integrated-chain contribution from Fajar and MYPAK to above 26%. These initiatives should strengthen competitiveness and support sustained margin expansion. Fajar recorded 9M26 net profit of Bt435m, reversing a net loss of Bt1.48b in 9M25. We therefore maintain our 2026 net profit forecast of Bt685m, vs a net loss of Bt2.26b in 2025, marking Fajar’s return to profitability for the first time in four years.