KUALA LUMPUR: AmInvestment Research has maintained its buy call on Kossan Rubber Industries with an unchanged fair value of RM4.65 per share.
This followed Kossan’s expansionary plans as well as efforts in improving quality and operational efficiency through the revamping and upgrading works of its older plants, it said in a research note today.
The research house said Kossan’s new plant is expected to achieve higher efficiency levels with lines running at 40,000 pieces of gloves per-hour and 2.6 million pieces of gloves for every worker.
“Currently, the packing line requires heavy manpower, which makes up around 50% of its production workers, and they (Kossan) plan to introduce an automated packing system to reduce reliance on labour.
“The group is confident in its ability to pass on costs, despite the influx of capacity. However, we believe that in the next six to 12 months, there will be downward pressure on selling prices as a 14% increase in industry capacity exceeds the 8%-10% growth in demand,” it said.
AmInvestment Research said it expects Kossan’s net profit margins in the financial year 2019 (FY19) and FY20 to improve to 9.6% and 10.5% respectively, from 9.3% in FY18 backed by capacity expansions, improved internal efficiency and strong demand growth. – Jan 14, 2020, Bernama
