New product to boost Karex’s earnings substantially

PETALING JAYA: Karex Bhd is expected to see growth in net profit between now and 2027 driven by a successful commercialisation of its synthetic condoms.

According to AmInvestment Bank Research (AmInvest Research), the rubber-products manufacturer’s core net profit is expected to grow by a compound annual growth rate of 42.4% on the back of rising revenue from the original-equipment manufacturing (OEM) and original-brand manufacturing (OBM) segments.

The growth in the OEM segment will be mainly driven by new products, while the OBM segment’s growth will be spurred by the rising demand for premium products in the US and Asia.

“In our projection, we expect the tender market continues to be weak due to declining government allocations into HIV prevention in the post-pandemic era,” AmInvest Research said.

The group has already secured the regulatory approval from US Food and Drug Administration and European Union for its new synthetic condoms.

The research house said it gathered that Karex had already shipped out some of the products, which was slated to be launched this year, to one customer that the company did not identify.

The research house said it expects the company’s gross profit margin to grow above 40% by 2027.

AmInvest Research said Karex’s balance sheet is healthy, with a net gearing ratio of 0.16 times as of 2024.

“Coupled with positive operating cashflows, we believe Karex has sufficient headroom to gear up for future expansion plans to cater to potential strong demand for its synthetic condoms,” the research house said, adding that Karex had set a target to have six production lines making the new products by July, and thereafter adding 10 new lines every year, with capex for each line is estimated to be around RM1mil.

However, the future expansion would depend on the market, the research house added.