PETALING JAYA: The mid to longer-term prospects of Kotra Industries Bhd
are expected to be anchored by rising health awareness among consumers and the ageing society trend.
RHB Research has a “buy’’ call on the stock and this is premised on the group’s capacity-driven growth story.
Its existing manufacturing plant is running close to optimal capacity and the completion of a new plant this year should anchor growth, moving forward, it said.
RHB Research added that it is positive on Kotra as nutraceutical products are considered discretionary products
Meanwhile, CGS-CIMB Research said Kotra’s core net profit is expected to fall 12% in financial year 2024 (FY24) before rising 2% in FY25 and 10% in FY26 on the back of lower local revenue growth.
It is maintaining a “hold’’ recommendation with a target price (TP) of RM5.19 a share.
The upside risks cited included higher demand for pharmaceutical products and increase in Covid-19 infections, while the downside risks are higher input costs and elevated advertising spend.
Kotra’s core net profit fell 31.6% year-on-year in the second quarter of FY24 on lower revenue and weaker operating margins.
RHB Research added that Kotra’s first half FY24 earnings came in below its and consensus expectations due to an unfavourable product mix and a high-base effect.
Export sales grew 32% quarter-on-quarter (q-o-q), accounting for 36% of group revenue, and that helped offset a lacklustre performance in the local sales segment (-2% q-o-q).
However, sequential top line growth turned positive for the first time following four consecutive quarters of decline, indicating a positive recovery in consumer demand for over-the-counter products.
Its TP is RM5.40 a share and the risks cited to its call include a spike in raw material prices, unfavourable drug pricing mechanism by the government and depreciation of the ringgit versus the US dollar.
