Various research houses maintained HOLD calls on Kossan Rubber Industries Bhd despite its sharp earnings growth, with target prices ranging from RM1.13 to RM1.19.
Analysts said the strong first-half performance was supported by higher glove average selling prices (ASPs) and improved efficiencies, but expect earnings to weaken in the second half as ASPs normalise and higher-cost inventories flow through.
Kossan’s 2QFY26 core profit jumped more than twofold year-on-year to around RM60 million, according to HLIB, while CIMB Securities reported core net profit of RM74 million. First-half core earnings reached RM94.5 million under HLIB’s calculation, up 57.3% year-on-year, while CIMB put the figure at RM105 million.
The stronger quarter was driven by higher glove ASPs, improved sales volumes, lower raw material costs and production efficiencies. Revenue also surged, with the glove and cleanroom segment benefiting from ASP adjustments following supply disruptions earlier in the year.
However, analysts expect the momentum to fade in 3QFY26. CIMB expects glove ASPs to fall to US$20 to US$21 per 1,000 pieces from US$25 to US$27 in 2QFY26 as key input costs normalise. HLIB similarly expects a material margin contraction as higher-cost inventories enter production amid declining ASPs.
HLIB cut its FY26 to FY28 earnings forecasts by 11%, 13% and 8.4% respectively, while CIMB lowered its FY26 forecast by 6%. Still, both highlighted Kossan’s strong net cash position of around RM1.6 billion as a buffer, while its growing cleanroom business could provide some resilience as the broader glove market remains oversupplied.
As of 10.04 am, the stock price dropped 3.57% to RM1.08.
