Kossan's Q1 core profit exceeds estimates, analyst raises FY25 outlook
KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) has raised Kossan Rubber Industries Bhd's earnings forecasts following upbeat results in the first quarter of financial year 2025 (Q1FY25).
The firm said the glovemaker's core profit after tax and minority interest (PATMI) of RM31.9 million, up 29.1 per cent year-on-year, exceeded its own full-year forecast by 26 per cent but within consensus' projection of 20 per cent.
The stronger earnings were driven by higher revenue and profit before tax margin from the glove and clean-room segment.
Therefore, HLIB Research raised its financial year 2025 (FY25) profit by 23 per cent to mainly account for higher average sales price (ASP) and profit before tax margin assumptions for the glove and clean-room segment.
"However, we conservatively maintain our FY26 forecast, which we deem reasonable under the current outlook. Besides, we introduce a FY27 core PATMI of RM264.8 million, representing a 13 per cent year-on-year increase," it said in a note.
Despite stronger earnings in Q1, HLIB Research expects Kossan to deliver relatively flat earnings in the second quarter (Q2), followed by a stronger performance in the second half of the financial year 2025 (2HFY24).
The firm pointed out that the glove and clean-room segment is expected to post flattish quarterly sales volume as US customers are still sitting on excessive inventories built up from 4QFY2, noting that a more meaningful restocking cycle is only anticipated in 2HFY25.
On pricing, it expects Kossan to lower the ASP around US$0.5-1.0 each 1000 pieces in Q2, primarily reflecting the pass-through of lower nitrile butadiene rubber prices in Q1 amid intense competition.
"Despite the ringgit's recent strength against the US dollar since late April, increasing by three point 3.0 per cent, we expect this segment to deliver relatively flat quarter-on-quarter earnings, primarily supported by a further moderation in raw material costs in Q2.
"For the total rubber product segment, a flattish sequential performance is anticipated. Overall, the group's earnings are expected to remain steady in Q2, with a gradual recovery expected in the following quarters," the firm added.
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