Kossan Rubber: Cost-push unwinds; maintain Neutral

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

20 August 2026

Kossan Rubber

Neutral

KRIB.KL, KRI MK

Price (20 Aug 26):RM1.12

Cost-push unwinds; maintain Neutral

▼Price Target (Dec-27):RM1.20

Prior (Jun-27):RM1.30

KRI’s 2Q26 core profit rose +63% q/q and +107% y/y, lifting 1H26 core profit to

RM104m or 59%/64% of JPMe/consensus. While this appears to be ahead of

expectations, we deem it in line as 2Q growth was largely ASP-led from cost-push

price increases, with utilisation broadly stable at ~73% and volumes showing no

meaningful uplift. 2Q26 unit EBITDA improved to ~US$4.7/k pcs from US$3.3/k

pcs, but we expect margins to normalise in 3Q26 as ASPs ease with the fading

cost-push tailwind, while input costs catch up with a lag. We cut FY27E/FY28E

core earnings by 10%/12% on lower ASPs and higher energy costs. Despite rolling

forward to Dec-27, our PT falls to RM1.20 from RM1.30 at an unchanged 22x P/E.

Maintain Neutral. While self-help initiatives should improve margin resilience,

normalizing ASPs and persistent industry overcapacity limit the scope for a

meaningful re-rating.

ASP-led revenue uplift. 2Q26 revenue rose 21% q/q to RM569m, driven by

a 21% increase in glove revenue to RM484m, while Technical Rubber Products

grew 26% q/q to RM54m (still small at 10% of group revenue). Gloves' uplift

was primarily ASP-led, reflecting cost-push price increases, rather than a

structural demand recovery, as volumes remained broadly stable. With rawmaterial availability improving and industry capacity still ample, we see

limited scope for producers to retain precautionary pricing buffers as input

costs ease.

A second cost-push ASP cycle is unlikely to replicate the first. July ASPs

have eased to ~US$20/k pcs from our estimated 2Q26 peak of ~US$27/k pcs,

as NBR prices fell towards ~US$1,000/t from ~US$2,000/t during the peak of

Middle East tensions. While renewed geopolitical tensions could trigger

another cost-push cycle, we expect pass-through to be more limited as

improved raw-material availability, excess industry capacity and intense

ASEAN competition constrain pricing power. We therefore lower our FY27

blended ASP assumption to ~US$22.7/k pcs from ~US$23.1/k pcs.

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