• Not-Rated. Supermax registered a core PATAMI of RM0.5mn during 1QFY24, which we deem in line with our in-house in market expectation. We anticipate an improvement in earnings in the upcoming quarters, expecting a positive performance. 1QFY23 revenue decline 20.3% QoQ, no thanks to lower ASP and subdued demand. However, PBT turned positive at RM3.1mn compared to LBT of RM23mn in prior quarter. No changes to our FY24-FY26F earnings forecast. We expect no further loss in Supermax's earnings, anticipating improved sales volume and operating margins. While overall demand is likely to stay subdued, an ongoing small order replenishment, a sustainable cost structure, and manageable operating costs can enhance the group’s performance. We have a non-Rated recommendation on the stock.

• Key Highlight. Management shared that US Customs and Border Protection (USCBP) has uplifted the Withhold Release Order (WRO) with effect from 18 September 2023. This development is expected to boost Supermax's sales volume moving forward. Despite a discouraging topline, the Group's cost management measures have improved, leading to lower operating costs due to reduced natural gas and raw material prices.

• Forecast. No changes to our FY24-FY26F earnings forecast.

• Outlook. We expect Supermax to maintain positive earnings through improved sales volume and operating margins. Despite overall weak demand, the combination of ongoing small order replenishments, a sustainable cost structure, and manageable operating costs can enhance the group’s performance. The decommissioning of the production facility by the glove players is projected to ease the industry's oversupply situation, gradually moving the market toward a state of normalisation. Nonetheless, despite reduced capacity in Malaysian market, we remain cautious on the potential for prolonged oversupply due to capacity issues in China.

Source: BIMB Securities Research - 30 Nov 2023