Review

• Kossan Rubber Industries Berhad’s (Kossan) 1QFY25 net profit of RM35.7mn came in within expectations at 25.4% of our full-year forecast and 22.2% of consensus estimates.

• Kossan’s 1QFY25 net profit increased 13.3% to RM35.7mn as revenue improved to RM487.4mn, up 7.9% YoY. The better performance can be attributed to the glove and clean-room divisions. 1QFY25 revenue from the glove division grew 9.5% to RM415.7mn, while PBT surged 36.8% to RM36.3mn boosted by higher ASP, volume growth and better operating efficiency. Meanwhile, the PBT from the clean-room division increased by RM2.0mn in tandem with a RM2.9mn increase in revenue.

• However, Kossan’s Technical Rubber Products (TRP) division PBT dropped by 45.2% to RM4.9mn, primarily due to a 6.6% drop in sales and higher operational costs.

• QoQ, 1Q25 PBT improved 21.9% to RM47.2mn despite lower revenue of 5.9% to RM487.4mn. The glove division recorded a 42.3% increase in PBT to RM36.3mn, supported by lower raw material costs and higher ASP. However, the sales volume declined due to earlier front-loading activities by US customers.

Impact

• No change to FY25-27 earnings forecasts.

Outlook

• Moving into 2Q25, we expect the sales volumes to drop slightly due to the uncertainty surrounding ongoing tariff policy shifts and intense competition in the non-US markets. As such, management would remain focus on improving operational efficiency as part of the cost management strategy to mitigate the policy risks.

• Meanwhile, we expect the TRP division to improve in coming quarters, supported by ongoing projects. As for the cleanroom division, management remains confident that the earnings contribution would remain stable.

Valuation

• We reiterate Buy on Kossan with a TP of RM1.93/share based on 1.3x FY26 P/B, after taking into account the company’s cash and investments of RM1.6bn as at March-25.

Source: TA Research - 23 May 2025