Target Price: MYR2.84
Healthy 1HFY13 Numbers
Supermax (SUCB)’s 1HFY13 core earnings of MYR67.8m were within expectations, at 49.0% and 49.6% of our and consensus full-year estimates respectively. We attribute the decent numbers to the easing of raw material prices as well as the increased automation in its plants that helped boost its bottomline. Maintain BUY, with our FV of MYR2.84 based on an unchanged 12x FY14 P/E.
• Decent numbers. SUCB’s 1HFY13 core earnings came in at MYR67.8m, which were within our and consensus expectations, making up 49.0% and 49.6% of FY13 forecasts respectively. On a YTD basis, the company recorded revenue of MYR650.5m, which ticked up 35.4% y-o-y mainly due to the increase in its production capacity as well as improved operating efficiencies in its factories. Sequentially, 2QFY13 revenue improved 42.2% y-o-y and 2.9% q-o-q owing to the easing of lower material costs. Meanwhile, improved automation in its plants also increased production efficiency, which helped boost its 2QFY13 bottomline to MYR35.5m (+15.5% y-o-y; +11.6% q-o-q)
• Latex prices to remain soft. The average latex price dipped 7% q-o-q (1QCY13 latex price was MYR6.14/kg vs. MYR5.72/kg in 2QCY12) which resulted in the improvement of its PBT and PAT margins by 60bps and 90bps q-o-q respectively. Moving forward, we are anticipating latex prices to remain soft at current levels (ie MYR5.30/kg) on the grounds of weak auto global sales as well as increase in supply from Thailand and Cambodia.
• Capacity expansion. Upon the full commissioning of its two new plants - Lot 6058 and 6059 - by 1QFY14, SUCB’s total nitrile capacity would more than double to 12.3bn pieces p.a. (from 5.4bn pieces currently). Nitrile gloves usually command a higher margin and are less prone to raw material price fluctuations.
• Maintain BUY. All in all, we remain positive on SUCB’s growth prospects backed by: i) favourable raw material prices, ii) the increase in its production capacity, and iii) increasing automation in its plants to boost operational efficiency. Thus we maintain BUY with our FV of MYR2.84 at an unchanged 12x FY14 P/E.
Publish date: 30/08/13