KUALA LUMPUR: Kossan Rubber Industries Bhd is expected to see a sequential uptick in its sales volume for the second half of 2024 (2H 2024), as demand for gloves continues to increase due to customers replenishing their depleting inventories.
Public Investment Bank Research (PublicInvest) said Kossan is currently running at a 60 per cent utilisation rate based on 24.5 billion pcs/annual installed capacity, up from 50 per cent in the fourth quarter (Q4) of 2023.
To recap, Kossan had impaired four old plants with a total capacity of 3 million in the financial year 2023 (FY23).
"Should sales volume continue to pick up, we anticipate Kossan's utilisation rate to reach about 70 per cent in 2H 2024," it said.
Meanwhile, PublicInvest said raw material prices, i.e., nitrile butadiene, are expected to normalise in 2H24, which the firm believes should lead to a higher margin in the gloves segment going forward.
It said Kossan remains the most resilient among its peers, with a 33 per cent net cash-to-market cap.
While we anticipate Kossan to report higher earnings, we think its current valuation largely reflects this positive outlook.
"Therefore, we maintain our neutral rating on Kossan, with unchanged target price of RM2.36," it added.