RHB Investment Bank Bhd (RHB Research) has upgraded Kotra Industries Bhd's recommendation to BUY from NEUTRAL previously as Kotra's earnings are expected to increase by 31% year-on-year in FY25 on the back of stronger sales of pharmaceutical products and easing of raw material prices.
RHB Research added that the recent spikes in influenza cases may also lead to greater healthcare awareness which could boost Kotra's neutraceutical sales.
As such, the research house has revised upward Kotra's target price to RM5.20 from Rm4.20, reflecting a 16% upside with a 7% FY25 yield.
Meanwhile, RHB Research said the completion of Kotra's new automated warehouse, set for completion by the end of 2025, will help streamline inventory management while reducing handling needs.
Furthermore, the research house is expecting that the recent touted implementation of diagnostic-related group measures by the government is set to have a net positive impact on generic drug manufacturers and Kotra is well-positioned to leverage its pharmaceutical product line for it.
In summary, RHB Research has raised Kotra's FY25F and FY26F earnings by 5% and 3% on the expectation of stronger pharmaceutical sales ahead.
