2H12 restocking will benefit processors and logistics players alike. Our top BUY is Goodpack. Margin recovery for glove-makers is already priced-in; accumulate Top Glove on weakness. Lower natural rubber price forecasts will have limited impact earnings. Stick with volume plays. Risks: European debt crisis, volatile crude oil prices, government intervention.

Hartalega Holdings; Hold; RM7.92Price Target: RM7.70; HART MK
Taking a breather

TP raised to RM7.70 pegged to 13x CY12 EPS led by better growth visibility. Lower latex prices to have marginal impact on EPS as latex glove segment is small (10%); expect flat 3Q12, margins still under pressure. Downgrade to Hold on limited share price upside.

Top Glove Corporation; Hold; RM5.00
Price Target: RM4.80; TOPG MKValuation setback

Cut latex price assumptions by 8% and raised FY12-14F EPS by 2-3%. FY12 will be a recovery year with lower latex costs and better sales mix. Raised TP to RM4.80 pegged to 15.5x CY12 EPS; expectations of margin recovery and stronger earnings have been priced in; Maintain Hold.

Kossan Rubber Industries; Hold; RM3.44
Price Target: RM3.30; KRI MKPositives priced in

Cut latex price assumptions by 8% and raised FY13/14 EPS by 2-3%; FY11 earnings intact. Expect flat earnings in 4Q1. Raised TP to RM3.30 pegged to 9x CY12 EPS; Maintain Hold as positives have been priced in.

Source: HwangDBS Research 17 Feb 2012