Shares of Malaysia-listed glove maker, Kossan Rubber Industries, rose sharply following better-than-expected third-quarter results.
The company, which had suffered three consecutive quarters of losses, reported a net profit of MYR41 million ($8.8 million) compared to MYR23.3 million in the same period last year. The improved results were attributed to enhanced cost-control management and a decrease in raw material costs.
While quarterly revenue decreased by 28% due to lower average selling prices and sales volumes across all divisions, analysts are optimistic about the company's future prospects.
Hong Leong Investment Bank upgraded its rating on Kossan Rubber to "hold" from "sell" and increased the target price to MYR1.35, reflecting the positive outlook. Analyst Sophie Chua Siu Li expects the company to remain profitable in the next quarter and throughout 2024-2025, thanks to an expected increase in orders despite potential earnings challenges caused by rising raw-material prices.
MIDF Research also raised its rating on the company to "neutral" from "sell" and adjusted its 2023-2025 earnings forecasts upward. Despite intense competition from Chinese rivals and a supply glut, the research house anticipates a potential "slight turnaround" in Kossan Rubber's glove division as buyers replenish inventory. The technical rubber products division is also expected to benefit from higher infrastructure spending and the ongoing global economic recovery.
Affin Hwang Investment Bank has taken an optimistic stance on Kossan Rubber's future, considering its cost-control initiatives, strong balance sheet, and potential dividend payouts. As a result, the bank upgraded the stock from "sell" to "buy" and raised the target price to MYR1.75.
Overall, Kossan Rubber Industries has demonstrated its resilience and is poised for growth in the coming years amidst an increasingly favorable business environment.
