KUALA LUMPUR: Maybank Investment Bank research expects Kossan Rubber Industries Bhd to be profitable in the financial year ending 2023 (FY23) with a core net profit of RM21 million, rebounding from previous net loss of RM57 million.
It also expects a higher net profit of RM50 million and RM92 million in FY25 and FY26.
Maybank said the 3Q23 net profit of RM34 million was above its expectations but that management remains cautious on 4Q23 outlook due to stiff competition, leading to low plant utilisation of 45 per cent currently.
Maybank said excluding forex and fair value gains on financial assets, Kossan core net profit for 3Q23 was RM33.7 million, turning 9M23 into the black with a core net profit of RM300,000.
"This compares to our consensus' FY23 net loss projections of RM57 million and RM 76 million. "We attribute the earnings gap to lower than-expected operating costs, thanks to continuous cost control, coupled with reduced raw material and natural gas costs in 3Q23," it said in a note today.
Elsewhere, no timeline was given for the potential decommissioning of four old plants, said the research firm.
The research firm also projects higher net profit of RM50 million and RM92 million in FY25 and FY26.
"Our new assumptions include a plant utilisation rate of 45 per cent, 55 per cent and 65 per cent for FY23, FY24 and FY25," the firm said.
Maybank reiterates its recommendation to hold on to the stock and raised the target price for it to RM1.59.
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