KUALA LUMPUR: Consumers' growing health consciousness about strengthening their defenses against Covid-19 and other noncommunicable diseases (NCDs) should act as a short-term re-rating catalyst for Kotra Industries Bhd's expansion.
In light of the recent spike in Covid-19 cases, RHB Research predicted that Kotra would profit greatly from the pent-up demand for neutraceutical products among consumers.
The firm said its over-the-counter (OTC) products (about 60 per cent of its topline) offer immunity benefits to consumers at different stages of life.
"Given the higher chances of infection in view of the new Covid-19 variant, coupled with a low incidence of wearing face masks in public again, the rise in confirmed cases could spike up the demand for cough and flu medicines, just like what happened in the second half of 2022 (2H22).
"Our base case scenario indicates that Kotra's OTC segment may see three per cent year-on-year growth in the financial year 2024 (FY24) net profit, should consumer demand be greater than expected," it said in a note.
The RHB economist is expecting a rosier gross domestic product (GDP) growth outlook for Malaysia in 2024, underpinned by a pick-up in economic activity by 1H24.
It also said an easing monetary policy would further support global economic conditions, as nutraceutical products are regarded as discretionary products.
"Kotra's mid- to longer-term growth prospects should be anchored by rising health awareness among consumers and the trends associated with an ageing society.
"The construction of a new manufacturing line (to be completed next year) could offer it the opportunity to tap into manufacturing products in different dosage forms that it currently is not involved in.
"We maintained buy on the stock with a news target price of RM5.40 from RM5.60 previously," it added.