We lowered our earnings forecast for FY15F by 7% to factor in the lower average selling prices (ASP) of gloves as we expect that the increased competition in the nitrile gloves industry would keep selling prices subdued.
Double-digit earnings growth in FY16F. Earnings forecast for FY16F was nudged marginally higher by 1.5% as we update the installed production capacity figures for FY16. We are expecting FY16F earnings to grow by double-digit on the back of significant earnings contribution from NGC.
Valuation & Recommendation
Maintain HOLD with a slightly higher target price of RM7.00 (previous target price: RM6.98), following our upward revision of earnings for FY16F. We derive our target price by pegging FY16 EPS at PER of 16 times.
While we remain convinced on its growth prospect that underpinned by its expansion ahead, we still wary over the stiff competition in the nitrile gloves industry. Yet, we reckon that the high operational efficiency of the Group would aid to mitigate the adverse effect of lower ASP of gloves. Overall, we maintain our neutral view on the company.
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