KUALA LUMPUR (Feb 23): CIMB IB Research has maintained its “Add” rating on Kossan Rubber Industries Bhd at RM8.70 with a lower target price (TP) of RM9.57 (from RM9.80) and said Kossan’s FY17 core net profit of RM185.7 million was broadly in line with house estimates (97%).

In a note Feb 22, the research house said the 3% deviation was due to a slower ramp up of all Plant 16 lines in 4Q17.

“However, FY17 revenue and net profit rose year-on-year (y-o-y), by 17.3% and 8.6% respectively, due to higher glove sales (+6% y-o-y) and a positive operating environment.

“4Q17 revenue waned 2.3% quarter-on-quarter (q-o-q) due to the stronger ringgit vs. US dollar. Yet 4Q17 net profit grew 5% q-o-q, from higher contribution by TRP and better economies of scale.

“We expect Kossan to record a stronger 1Q18F as all eight lines in Plant 16 (3 billion per annum capacity) are ready for commercial production beginning 1Q18F.

“Maintain Add, with lower 12-month TP of RM9.57 (22.4x CY19F P/E),” it said.