AMRESEARCH Sdn Bhd has reaffirmed is its “buy” call on Kossan Rubber Industries Bhd, with an unchanged fair value of RM5.05 a share.
It continues to peg its valuation to a price-earnings ratio of 17.5 times over its financial year (FY) 2014 forecast earnings.
“Kossan ended FY13 on a strong note with a net profit of RM39 million in its fourth quarter, which extended its FY13 earnings to RM141 million.
“The results were in line with expectations, accounting for 99 per cent of our forecast and 103 per cent of consensus estimate,” AmResearch said in a note yesterday.
The research house said the group’s 38 per cent on-year surge in net profit can be mainly attributed to margin expansion.
“The expansion was driven by better production efficiency, an improved product mix (nitrile gloves: 55 per cent in FY13 versus 43 per cent in FY12) as well as higher units of glove sold,” AmResearch noted.
The higher year-on-year sales volume had more than mitigated the decline in average selling price following the softer raw material prices (latex: -15 per cent year-on-year, nitrile: -22 per cent year-on-year), it added.
“Looking ahead, We believe Kossan’s earnings growth will continue to be capacity-driven,” it said.