PETALING JAYA: CIMB Research has maintained its “buy” call on condom maker Karex Bhd
after coming away positive from the company’s investor meetings at Invest Malaysia 2026.
While cost headwinds remain elevated, Karex expects the impact to be offset by gradual average selling price (ASP) increases of circa 20% to 25% and a tighter global condom supply backdrop.
“We expect the gradual ASP hikes to have a larger impact from the first quarter (1Q26) of financial year ending June 30, 2026 (FY26)/FY27 onwards with sticky contract renewals re-basing the industry price curve and supporting a gradual margin recovery,” it said.
CIMB Research maintained its target price of 70 sen, pegged to 18.8 times 2027 price-to-earnings ratio (PE), in line with global intimate wellness peers.
“At current levels, Karex trades at an undemanding 12.8 times 2027 PE relative to our projected earnings growth trajectory, with a three-year core net profit compounded annual growth rate of 57.5%,” the research said.
At last look, Karex was trading at 48 sen.
CIMB Research said Karex shared that the US-Iran war had increased pressure on key cost lines, including packaging, silicone oil and logistics, which collectively account for about 50% of cost of goods sold.
The group has secured three to six months of raw material inventory as a near-term buffer.
To mitigate margin pressure, Karex is implementing gradual ASP hikes of about 20% to 25%, supported by a structurally tighter supply backdrop following capacity rationalisation and tender withdrawals among large manufacturers amid compressed margins.
The research said it viewed the pricing environment as increasingly conducive to sustained ASP recovery.
CIMB Research added that while the impact of ASP hikes will likely only become material from 1Q27 onwards, it views the reset as structurally positive as it re-bases the industry price curve following a prolonged multi-year cost upcycle.
Once embedded in contract renewals and customer price lists, ASPs tend to be sticky and less sensitive to reversal, even as input costs normalise.
“Karex could also potentially claw back circa US$2mil (around RM8mil) in tariff refunds in 4Q26, relating to US import tariffs paid over the nine months ended March 2026 following the reduction in the tariff rate to 10% from 19% effective March, though we have yet to account for this in our forecasts,” it said.
