The research house said on Wednesday LSK is on track to grow its production capacity by 50%-58% to 9,000-9,500 tonnes per annum by 2020F. Demand to be driven by export-oriented customers, i.e. from US.
“Maintain Add with a lower TP of RM1.45. This is now based on 14.8 times CY20F P/E, a 30% discount to the consumer sector average CY20F P/E of 21 times,” it said.
CIMB Research said in 4Q18F, it expects LSK to record net profit of RM3.1mil to RM3.3mil, which indicates on-quarter and on-year increases of 3%-9% and 10%-17%, respectively.
This likely brought its full-year FY18 net profit to RM10mil to RM10.2mil (65.9% to 69.2% on-year), which is within the research house’s expectations.
“Our forecasts of stronger 4Q18 results is based on the assumptions of: i) higher sales volume from growth in production volume (+50% on-year), and ii) low latex prices.
“Going into 2019, LSK will focus on improving operating efficiencies by increasing
“In 1H19, the group will install its first robotic arm and a more advanced drying machine, which we believe could increase its overall efficiency by 20%-25%. In total, this should expand its overall production capacity by another 1,000 tonnes to 1,500 tonnes annually from FY19F onwards,” it said.
Did you find this article insightful?