4 days ago
Global condom market growth lifts Karex's outlook
PETALING JAYA: Analysts expect the global condom market to grow faster than the global economy, driven by rising sexual health awareness, a shift from government to private sector procurement and greater eCommerce adoption.
This is expected to bode well for condom maker Karex Bhd , said Kenanga Research.
'This trend favours large, innovative manufacturers like Karex, which is well-positioned to capture more market share, high-value condom and lubricant orders through its diverse product portfolio, regulatory reach, and strong environmental, social and governance credentials.
'While near-term sales may be affected by evolving tender commercial dynamics, the group sees medium-term growth opportunities – particularly its higher margin synthetic condoms and lubricant products, which are gaining traction in key markets.'
For its third quarter of financial year ended March 31, 2025 (3Q25), Karex's net profit dipped to RM5.09mil from RM6.02mil in the previous corresponding quarter, while revenue improved to RM135.72mil from RM127.05mil a year earlier.
In a filing with Bursa Malaysia, Karex said the higher revenue was primarily due to stronger sales of both condoms and personal lubricants during the quarter.
'Despite the increase in sales, the implementation of minimum wage increases in Thailand and Malaysia, heightened logistics costs stemming from trade disputes and less favourable foreign-exchange rate movements resulted in a decrease in profitability.
'As a result, the 3Q25 profit before tax of RM6.6mil represented a decrease of RM1.7mil in comparison to the corresponding quarter in the previous financial year,' it said.
For the nine-month period of financial year ended March 31, 2025 (9M25), Karex's net profit dropped to RM9.67mil from RM18.6mil, while revenue fell to RM377.63mil from RM383.93mil a year ago.
Kenanga Research said 9M25 net profit fell short of expectations, accounting for only 47% of its forecast and 52% of consensus estimates.
'A five sen dividend was declared for the quarter, unchanged year-on-year.'
Despite the improved outlook, the research house lowered the company's financial year 2025 (FY25) and FY26 net profit forecasts by 32% and 16%, respectively, to RM14mil and RM38mil after incorporating the weak 3Q25 results.
It also reduced its margin assumptions to align with the prevailing trends.
Correspondingly, it lowered its target price by 16% to 90 sen from RM1.07 previously, with an unchanged targeted FY26 price-to-earnings ratio (PER) of 25 times.
'This represents a 20% premium to the average historical five-year forward PER of its international peers to reflect its dominant market position and strong growth prospects.'
