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Results Note – Kossan (BUY, maintain) - 1QFY13 core net profit jumped +51% yoy to RM33.2m




Affin Hwang Investment Bank Bhd


27 May 2013





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Results within expectation Kossan’s (KRI) 1QFY13 revenue grew by a healthy +13% yoy to RM327.3m, mainly driven by: 1) a healthy growth in volume sales (low teens), particularly in its higher margin technical rubber products (+6% yoy growth in revenue), examination gloves (+13.9% yoy in revenue) and, 2) improved product mix, contributed mainly from its special purpose gloves (clean room gloves +21.4% yoy in revenue). Taken together with the: 1) sharp fall in latex price (-20.8% yoy), (1QCY13’s average latex price: RM6.62/kg vs 1QCY12’s average latex price: RM7.77/kg), and 2), better operating efficiencies boosted by plant automations, the company’s EBIT margin, edged up by +4.1%-points, to 18.3%. Despite a 7.7% yoy rise in operating expenses to RM267.5m, mainly due to the implementation of minimum wage effective in January 2012, KRI’s net profit jumped by +51.3% yoy to RM33.2m. Results were within both our and street’ expectation, accounting for 27% of both our and consensus full year projections

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