KOSSAN: Strong Earnings Performance on Efficiency Gains, Positive Outlook Maintained

Performance Review

The company reported a robust financial year 2025 (FY25) core net profit of RM137.8 million, aligning closely with analyst expectations at 98.1% of the house’s full-year estimates and exceeding consensus forecasts by 103.6%. Despite an 8.8% decline in revenue to RM1.75 billion, the group’s net profit demonstrated significant growth, rising 27.9% year-on-year.

This notable earnings growth was primarily fueled by enhanced contributions from both the glove and clean-room divisions, alongside a significantly lower effective tax rate of 12.9%, a 10.4 percentage point reduction from the previous year. Specifically, the gloves division saw its profit before tax (PBT) surge by 36.7% due to effective cost optimisation measures and reduced production costs. Similarly, the clean-room division’s PBT improved to RM12.4 million from RM11.1 million in FY24.

Challenges and Headwinds

In contrast, the Technical Rubber Products (TRP) division faced headwinds, with its PBT declining 46.2% to RM16.2 million. This was primarily attributed to a 6.8% decrease in revenue, exacerbated by a stronger Ringgit, an unfavorable product mix, and higher production costs. These factors collectively led to a reduced PBT margin of 8.6%, a 6.3 percentage point drop. Quarter-on-quarter, the group’s 4Q25 PBT saw a slight easing of 1.4% to RM44.4 million, mainly due to weaker performances from the clean-room and TRP segments. Management also noted that RM35.6 million worth of glove shipments were deferred to January 2026 because of port congestion.

Future Outlook

Looking ahead, despite the prevailing oversupply environment in the glove industry expected to continue into 2026, the company is poised for sustained earnings growth in FY26. This confidence stems from ongoing cost optimisation initiatives, enhanced operational efficiency, and the strategic expansion of its diversified glove product range, all of which are expected to help preserve margins. The anticipated improvement in the glove division is projected to partially offset the ongoing challenges within the TRP division, which continues to grapple with cost pressures and market uncertainties. Reflecting this positive outlook, the investment bank has revised its FY26 and FY27 earnings forecasts upwards by 4.5% and 4.4% respectively.

Investment Recommendation

The investment bank reiterates its Buy recommendation on the company, maintaining an unchanged target price of RM1.30 per share. This valuation is based on 0.9x FY26P/B. The group’s strong financial position is underscored by its substantial cash and investments, which stood at RM1.6 billion as of December 2025.