KUALA LUMPUR (Sept 13): CGS-CIMB Research has maintained its "Add" rating on Power Root Bhd at RM2.08 with a higher target price of RM2.30 (from RM2.20) and said Power Root's share price has rallied c.44% in the past three months, in tandem with its stellar 1QFY3/20 results and positive outlook.

In a note Sept 12, the research house said Power Root remains focused on prudent cost control, streamlining its distribution network and building brand equity in its key markets.

CGS-CIMB Research said Power Root's strong EBITDA margin improvement in 1QFY20 indicates that all the low hanging fruits have been picked, and hence it expects smaller incremental margin gains going forward.

"We gather that in order to sustain its sales recovery, Power Root will continue to explore new product innovations (such as its recent launch of the new Alicafe Warung non-functional coffee range) to capture new segments in the domestic market.

"For exports, the group is looking to penetrate further into emerging markets such as China, where it is increasingly focusing on e-commerce to grow sales. It also recently appointed a new distributor with better financial strength to support sales growth in the Middle East," it said.

At 10.32am, Power Root shed 0.5% or 1 sen to RM2.01 with 3.1 million shares traded.