KUALA LUMPUR: Kenanga Investment Bank Research continues to see further upside for Supermax Corp Bhd after raising once more its average selling price assumptions.
"We highlight that industry ASPs have strengthened for Aug delivery.
"Coupled with the latest strong Q-o-Q earnings results of glove players, this is suggesting that demand will continue to be strong over the next few quarters," it said, while reiterating its "outperform" recommendation on the counter.
The research house said it raised its FY20 and FY21 net profit forecasts by 46% and 85% respectively to account for the revision.
It increased the stock's target price to RM17.10 from RM14 previously.
According to Kenanga, Supermax is expected to gain from higher margins from both its gloves manufacturing an OBM distribution due to anormal demand and acute supply tightness.
It said buyers are paying 30% to 50% deposits in advance to secure glove supply and timely delivery.
The glove maker expects the heightened demand to continue for the next one to 1.5 years.
New capacity that has come online includes facilities in Supermax's Plant 12 with three new lines having started commissioning at end-March 2020 in Block A and eight lines in Block B expected to be fully commissioned by 2H 2020.
Installed capacity will rise 13.4% to 26.2 billion pieces per annum upon full commercial production by 2H 2020.