PETALING JAYA: RHB Research expects Kossan Rubber Industries Bhd’s sales volume to pick up sequentially in view of a more balanced demand-supply dynamic by the second half of this year.

       “We now expect ASPs (average selling prices) to trend higher in 3Q24 in view of elevated raw-material prices. All in, we retain our view that glove demand will continue picking up in the coming quarters, as client inventory levels deplete – this is on top of inventory (stockpiled since 2020) approaching expiry dates (typical shelf life for gloves: three to five years),” RHB Research said.

       Kossan reported 2023 core profit of RM34mil – below RHB Research and consensus estimates due to subdued ASPs as well as one-off logistical constraints arising from the Red Sea crisis.

       “We gather that ASP stabilised in 1Q24, with order volume continuing to gain traction amid a more balanced demand-supply dynamic. Our ‘buy’ call is premised on gradual improvement in market dynamics by 2H24, as client inventory levels deplete,” it added.

       Kossan posted core profit of RM29.5mil in 4Q23, which signifies a decline of 36% quarter-on-quarter (q-o-q) but better than the core loss of RM1.8mil a year ago.

       “The weaker-than-expected results were likely driven by softer ASPs (as raw material cost normalised in the previous quarters), coupled with the one-off logistical constraints arising from the Red Sea crisis.

       “Surprisingly, the group declared an interim dividend of two sen, being the only glove maker (among the top-four players) that still pays dividends,” the research house said.

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       Kossan is the only glove maker among the top four players to have never reported negative earnings before interest, tax, depreciation and amortisation, a sign which indicates solid operating efficiency as well as cost discipline.