Overview. 3QFY20 revenue increased to RM1bn (47.3% qoq, 94.5% yoy), while net profit jumped to RM348.7m (166.1% qoq, 609.2% yoy). The stronger results were mainly due to higher sales volume (9.2% qoq, 34.9% yoy), increase in ASPs (40-42% qoq, 44-46% yoy) and better production efficiency. Profit margin improved to 33.7% (+15.1 ppts qoq, +24.5 ppts yoy).
Key highlights. Kossan’s sales have been fully taken up until end-2021, with orders for 2022 currently being received. According to management, ASPs have seen increase of c.40% qoq in 3Q and will increase 25% mom until Dec. Plant expansion remains on track and is expected to increase total installed capacity from current 32bn to 42.4bn (+33%) by end-2022. (refer table 3).
Against estimates: Above. 9MFY20 net profit of RM544.6m (+232.5% yoy), made up 80% and 75% of our and consensus full year forecast. We deem this to be above expectations, owing to higher-than-expected increase in ASPs which will be reflected in upcoming quarters.
Outlook. We estimate Kossan’s prospect to remain strong. It is seen as catching up in ASPs with its peers and expected to record sequentially stellar performance in the coming quarters. Long-term demand post-Covid-19 is expected to remain higher due to structural change in glove usage globally and greater hygiene awareness. We have increased our FY20/FY21f earnings forecast by 65%/95% as we pencil in higher ASPs and margin.
Our call maintain BUY. Despite our higher earnings revision, we maintain our TP at RM10.00, implying a lower PER of 14x (from 30x previously) which is based on FY21f EPS. Lower implied PER is to reflect our view of earnings peaking in FY21f and a moderation in earnings growth towards more sustainable levels beyond that. The market sentiment might be weaker due to the positive news of the progress made in vaccines development.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
RainT
READ
2020-11-25 17:45