Supermax’s
1QFY12 results were within expectations. Overall, the numbers were flat q-o-q
despite a 10% drop in 1QFY12 revenue as customers opted for thinner gloves, for
which the selling prices are lower. However, the company achieved better cost efficiency,
which partly mitigated the drop and led to a flat net profit growth. Although the current quarter’s results only made up 22% of our FY12
forecast, we are leaving our forecast unchanged as we see
better results in the upcoming
quarters, boosted by a bigger production capacity, the introduction of new gloves, a stronger
USD/MYR and lower latex prices. Maintain Buy.
Within expectations. Supermax’s 1QFY12 results were
within consensus and our expectations, making up 22% of our FY12 forecasts.
Overall, the results remained quite flattish q-o-q, with both the 1QFY12
revenue and net profit of RM248.5m and RM28.0m marginally down by 10.0% and
0.6%. Revenue fell as its customers
opted for thinner natural rubber
and nitrile gloves, causing selling prices to weaken. However, we believe that the net profit still came in
flat q-o-q despite a 10% drop in revenue, attributed to the glove maker
achieving higher cost efficiency as it moves up the learning curve in relation to
the production of thinner gloves, which we understand have been in demand since
2 years ago. Finally, on a YTD comparison, both the revenue and net profit were
up 3.0% and 14.8% respectively, contributed by the higher sales of gloves
sold as its production capacity expanded
and as the company became more efficient.
No change to our FY12 earnings forecast. Although 1QFY12 results only made
up 22% of our FY12 forecast, we are keeping our earnings forecast unchanged for
now as we expect improved quarterly performance
in the upcoming quarters, contributed by the bigger production capacity
and introduction of new product lines (new gloves). Also, given the ongoing
economic crisis in Europe, the industry may continue to see a stronger USD/MYR
and the prices of commodities such as latex price trend lower. On the other hand, as in any economic crisis,
sales volume may also be affected since about 30% of Supermax’s rubber gloves are sold to Europe. However, we are
of the view hat the favorable exchange
rate and lower production cost would more than compensate for the lower sales
volume.
Maintain Buy. Our fair value for Supermax remains unchanged
at RM2.50, based on the existing PER of 13x FY12 EPS. We continue to like the
company’s attractive valuation as well as recession-proof nature of the
industry it is in.
Source: OSK
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