PT Indah Kiat Pulp & Paper Tbk (INKP) is embarking on a crucial phase in its operational history through a strategic transformation move. The company is now beginning to reduce its reliance on pulp commodity price fluctuations by focusing its expansion on the packaging business sector, which offers more competitive margins.
The new plant development project in Karawang, which cost an investment of around USD 3 billion, is projected to be the main catalyst for changing the issuer's revenue structure. This facility is designed to increase production capacity by up to 3.9 million tons, with the majority of products focused on white packaging, which holds higher economic value compared to the previous production line in Serang.
Mirae Asset Sekuritas analyst, Wilbert Arifin, revealed that operational efficiency is INKP's competitive advantage amid global industry challenges. With production costs among the lowest in the world, supported by raw material supplies from affiliates and the use of renewable energy, the company is considered capable of maintaining margin resilience despite facing pulp price pressures in the international market.
It is predicted that by 2028, the packaging business's contribution to INKP's total revenue will reach 49.9 percent, surpassing the combined graphic paper and pulp businesses. This positive trend is accompanied by a projected average core profit growth of 11.8 percent per year, while strengthening the balance sheet following the completion of the major capital expenditure phase.
Responding to these prospects, Mirae Asset Sekuritas Indonesia gives a buy recommendation with a stock target price of Rp13,500. However, investors are still advised to remain attentive to risk variables, such as global commodity price dynamics, the effectiveness of production capacity ramp-ups at the new plant, and regulatory policies concerning the company's operations.
