Kossan Rubber expects demand for gloves to surge over 40 percent

According to RHB Research, Kossan Rubber is expecting demand to surge by 30 to 50 percent versus a supply increase of 10 to 20 percent.

The research house believes that the average selling price (ASP) will be driven by tight demand-supply dynamics.

Chief executive officer, Lim Kuang Sia says the pandemic has boosted gloves demand by 30 to 50 percent and with a real shortage in the market, capacity can only be increased by 10 to 20 percent at best.

“Kossan’s lead time has doubled to nine months when compared to 4.5 months last month. The utilisation rate is now almost full at 90-95%, vis-à-vis normal levels of 80-85% before Covid-19 erupted,” the research house said.

On the supply side, the MCO has slowed construction of new manufacturing plans, and therefore ASP rises are inevitable and it will be across the board for all gloves companies.

“We reiterate our call with a higher TP, as we have increased our FY20F22F earnings by 20-46% after increasing ASP and volume assumptions,” it said.

Kossan’s 1Q20 QoQ and YoY earnings are expected to improve in the near term and in the long run, Kossan, according to RHB Research was already a beneficiary of the long-term global uptrend in gloves consumption, at 8 to 10 percent pa.

 

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