[%ltgF%] 
Research by Public
Outperform - TP RM2.36

"Improved Sales Volume and ASPs"

Kossan Rubber (Kossan) reported a net profit of RM31.3m in 2QFY24, compared to a net loss of RM3.3m in 2QFY23. After stripping off non-operating items, Kossan recorded a RM26.8m core net profit in 2QFY24, up from a core net loss of RM8.3m in 2QFY23, mainly contributed by stronger sales volume. The results were below consensus at 36% but exceeded our estimates at 59%. The discrepancy in our forecasts was due to the higher-than-expected sales volume and improved ASPs. We gather that Kossan is currently selling at a higher blended ASPs of USD18/1k pcs (previously at c.USD16-17/1k pcs in 4QFY23). We anticipate a sequential uptick in the sales volume in 2HFY24, as demand rises due to a pick-up in stock replenishment activities. Hence, we raise our earnings forecast for FY24F by 18% to factor in higher sales volume and ASPs, while we maintain our FY25F-26F earnings forecasts. Given the recent decline in share price, our TP of RM2.36, which is based on 1.5x (near +1SD 1-year historical mean) CY25F BVPS, is suggesting an upside potential of 16%. Hence, we upgrade our call on Kossan from Neutral to Outperform.

Analyst:
Thye May Ting
[%QauD%]

$KLSE-KOSSAN 
Research by Public
Outperform - TP RM2.36

"Improved Sales Volume and ASPs"

Kossan Rubber (Kossan) reported a net profit of RM31.3m in 2QFY24, compared to a net loss of RM3.3m in 2QFY23. After stripping off non-operating items, Kossan recorded a RM26.8m core net profit in 2QFY24, up from a core net loss of RM8.3m in 2QFY23, mainly contributed by stronger sales volume. The results were below consensus at 36% but exceeded our estimates at 59%. The discrepancy in our forecasts was due to the higher-than-expected sales volume and improved ASPs. We gather that Kossan is currently selling at a higher blended ASPs of USD18/1k pcs (previously at c.USD16-17/1k pcs in 4QFY23). We anticipate a sequential uptick in the sales volume in 2HFY24, as demand rises due to a pick-up in stock replenishment activities. Hence, we raise our earnings forecast for FY24F by 18% to factor in higher sales volume and ASPs, while we maintain our FY25F-26F earnings forecasts. Given the recent decline in share price, our TP of RM2.36, which is based on 1.5x (near +1SD 1-year historical mean) CY25F BVPS, is suggesting an upside potential of 16%. Hence, we upgrade our call on Kossan from Neutral to Outperform.

Analyst:
Thye May Ting
thye.mayting@publicinvestbank.com.my

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)