KOSSAN: Earnings Exceed Expectations on Cost Efficiencies, Target Price Raised
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank report highlights that the company’s nine-month financial year 2025 (9MFY25) net profit of RM104.6 million came in within expectations, constituting 74.5% of the firm’s full-year estimates and 78.0% of consensus projections. For the quarter, a first interim dividend of 2.0 sen per share was proposed.
Performance Review
Despite a 5.8% year-on-year decline in revenue to RM1.3 billion for 9M25, the company recorded a robust 13.3% increase in net profit. This strong performance was primarily attributed to a lower effective tax rate of 19.1% (down 1.9 percentage points) and enhanced contributions from its glove and clean-room divisions.
The gloves division notably saw its pre-tax profit (PBT) surge by 33.1% to RM104.6 million. This growth was driven by higher average selling prices (ASP) and effective cost optimisation, which collectively boosted the division’s PBT margin by 2.7 percentage points to 9.6%. Similarly, the clean-room division posted a higher PBT of RM9.8 million, up from RM6.9 million in 9M24, benefiting from lower raw material costs and higher ASPs.
However, the Technical Rubber Products (TRP) division faced headwinds, with revenue declining by 11.2% to RM142.8 million. An unfavourable product mix contributed to a significant 49.6% decline in its PBT, which stood at RM12.5 million for 9M25.
Quarter-on-quarter, the third quarter of 2025 (3Q25) showed a positive trend, with PBT growing 16.9% to RM45.0 million. This was in line with a 14.9% increase in revenue to RM439.0 million, as all business divisions demonstrated improvements driven by higher volumes and sustained cost efficiency.
Future Outlook
The global demand for gloves is anticipated to improve, supported by steady restocking activities and a gradual return to normalised consumption levels. However, the report cautions that the oversupply situation is expected to persist into 2026, largely due to ongoing relocation of production by Chinese glove manufacturers outside of China.
Management remains committed to enhancing operational efficiency and broadening its diverse range of gloves, including products tailored for niche markets, which are expected to support margins. The TRP division is projected to maintain stability in 4Q25.
TA SECURITIES has reiterated its BUY recommendation, setting a target price of RM1.30 per share. The group’s cash and investments were reported at RM1.6 billion as of September 2025.
