Kossan Rubber Industries reported a core PATANCI of RM137.7m in FY22 after excluding a one-time-off item of -RM24m. The earnings came in below expectations, accounting for 85% of the estimate and 82% of consensus’ full-year FY22 projection said MIDF. The earnings miss was mainly due to lower-than-expected revenue and higher-than-expected input costs. Meanwhile, the group declared its first interim dividend of 2.5sen per share.
This was a disappointing revenue and earnings in 4QFY22 for the rubber glove manufacturer, Kossan’s 4QFY22 revenue fell -14.1%qoq to RM481.4m owing primarily to lower sales from the gloves and technical rubber divisions which offset the higher revenue from Cleanroom division. The gloves division suffered an operating loss of -RM22.7m in 4QFY22 because of reduced revenue and higher energy cost.
In view of this grim prospect, MIDF slashed the FY23-24F earnings estimates and introduce FY25F earnings projection with reduced core PATANCI estimates for FY23F by -56% and FY24F by -46%, to reflect the challenging outlook ahead. This is after accounting for lower ASPs, lower USD/RM exchange rate, and higher energy costs, which reduce earnings estimates.
Reiterate SELL with a revised TP of RM0.88 (from RM0.90). MIDF revised the TP to RM0.88 (from RM0.90).
TP is based on an FY24F EPS of 5.3sen pegged to a revised PER of 17x PER (from 11.6x), which is its historical 5-year mean
PE. MIDF maintains its SELL call on Kossan. Moving forward, MIDF expects Kossan’s outlook to remain challenging in the near term before turning profitable in 2HFY23F.
