Kossan to benefit from restocking amid pandemic

KOSSAN Rubber Industries Bhd is expected to benefit from a ramp-up in restocking activities due to the Covid-19 pandemic, and is likely to register a solid first quarter (1Q 2020) result due end-May, said Kenanga Research.

“We believe Kossan will benefit from robust demand which has led to longer delivery lead times — the time between placement of order and delivery — which has risen to an average of 80-100 days compared to 40-50 days normally.

“Signs of demand outstripping supply could potentially lead to higher average selling prices,” the research house said in a note today.

The Malaysian Rubber Glove Manufacturers Association has forecast demand for rubber gloves to grow by 20% to 230 billion pieces in 2020.

Kenanga Research expects Kossan’s 1Q20 profit after tax and minority interests to be at RM66-68 mil.

It said the company’s three new plants, Plants 18, 19 and 20, will bring the group’s total production capacity to 32 billion per annum once they are in full commission.

Kenanga Research has set an outperform call for the company, with a target price of RM6.30. — April 15, 2020, Bernama

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