By Ying Xian Wong
Kossan Rubber Industries shares jumped Thursday morning as analysts raised ratings and target prices for the company following a quarterly earnings beat.
Shares in the Malaysia-listed glove maker climbed as much as 11% and were recently 6.8% higher at 1.58 ringgit, bringing 12-month gains to 40%.
Kossan Rubber late Wednesday said it turned a profit in the third quarter after three straight quarters of losses. It posted a net profit of MYR41 million ($8.8 million), compared with a profit MYR23.3 million a year ago, mainly driven by improved cost-control management and lower raw-material costs.
Quarterly revenue fell 28% on year, due to reduced contributions from all divisions amid lower average selling prices for its products as well as lower sales volumes.
Hong Leong Investment Bank on Thursday raised Kossan Rubber’s rating to hold from sell and lifted its target price to MYR1.35 from MYR1.00 to reflect the company’s improved outlook.
Although an increase in raw-material prices starting from September may weigh on earnings, Hong Leong analyst Sophie Chua Siu Li said in a note that Kossan Rubber is likely to remain profitable in the next quarter, and throughout 2024 and 2025 amid an expected uptick in orders.
MIDF Research also upgraded its rating on Kossan Rubber, raising it to neutral from sell, and lifted its 2023 to 2025 earnings forecasts for the company. The research house said in a note that the company’s glove division may stage a “slight turnaround” as buyers replenish inventory, despite a continued supply glut and intense competition from Chinese rivals.
The outlook for the technical rubber products division seems strong, bolstered by higher infrastructure spending and the global economic recovery, which could offset weakness in the glove segment, MIDF analyst Genevieve Ng Pei Fen said in a note Thursday.
Affin Hwang Investment Bank also took an optimism view of the company’s outlook, citing its cost-control initiatives, balance-sheet strength and potential dividends in this year. It upgraded the stock to buy from sell and raised the target price to MYR1.75 from MYR1.05.
Write to Ying Xian Wong at yingxian.wong@wsj.com
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