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KUALA LUMPUR, April 21 -- Kossan Rubber Industries Bhd's share surged 8.0 per cent in early trade after announcing its best-ever quarterly earnings yesterday.
At 9.30am, the counter added 29 sen to RM4.09 with 8.21 million units transacted.
Kossan’s net profit surged to RM1.04 billion in the first quarter ended March 31, 2021 (1Q21) from RM64.8 million in the same quarter last year,
Revenue jumped 258.51 per cent to RM2.19 billion during the quarter under review from RM611.46 million previously, thanks to higher contribution from its glove division, the rubber glove maker said in a Bursa Malaysia filing today.
Kossan’s glove division recorded revenue of RM2.09 billion in 1Q21, rising 281.75 per cent from RM548.25 million in 1Q20.
On prospects, Kossan expects the demand for gloves post-pandemic to continue undergoing structural growth as a result of increased healthcare standards and hygiene awareness in both the medical and non-medical sectors.
As such, even though average selling price (ASP) is projected to moderate as the demand-supply imbalance eases, demand will remain above pre-pandemic levels, it added.
MIDF Research, in a note, projects that ASP may continue to climb in the coming quarters as there is room for Kossan to catch up with current market prices.
That said, the trajectory of the pandemic is still filled with uncertainties even as countries roll out vaccination programmes.
“It has also increased our FY21 earnings forecast by 232.3 per cent as we raise ASP and margin assumption.
"However, we keep our estimates for FY22 and FY23 pending further clarity on demand and ASP outlook," the research house said, adding that it is also maintaining a buy call on Kossan with an adjusted target price of RM5.83 from RM7.33 previously.
Meanwhile, AmBank Research is maintaining its hold recommendation on Kossan.
It has also raised FY21 core net profit forecast by 38 per cent as its increase ASP assumption to US$47/1,000 pieces from US$45/1,000 pieces and average cost of natural gas to RM25.00 per million British thermal unit (MMBtu) from RM34.80b MMBtu, in line with the new prices stipulated by Gas Malaysia Bhd.
AmBank Research also raised Kossan’s FY22 net profit by 2.0 per cent to account for a weaker US dollar/ringgit.
"Going forward, we believe that glove ASPs will see a decline in the second half of FY21. Glove urgency is expected to wane as global COVID-19 vaccination measures start to take effect.
"However, the demand for gloves will likely remain stable post-pandemic following the wider adoption of gloves in developing countries," it noted.