KUALA LUMPUR (Feb 24): A recent US Supreme Court ruling limiting emergency tariffs imposed under the Trump administration may offer short-term support for Malaysian manufacturer Kossan Rubber Industries Bhd (KL:KOSSAN).
While this reduces costs for US buyers, structural oversupply and a weakening US dollar continue to weigh on the company’s prospects.
With a temporary imposed 15% tariff valid for 150 days, CIMB Securities viewed this development in a note on Tuesday as “mildly positive”, noting that it reduces cost for the US importers by approximately US$0.80 per 1,000 pieces.
"While the ruling may provide a temporary boost to Kossan’s order volume, oversupply continues to cloud longer-term prospects. We anticipate global demand-supply dynamics to rebalance by 2027, alongside continued USD weakness against the ringgit," the house said.
HLIB Research supported this view, suggesting the ruling could trigger “potential mild front-loading” by US customers following the recent US Supreme Court ruling.
This may provide a temporary boost to order volumes and sector sentiment.
However, the research unit cautioned that any significant volume uplift is more likely to be evident in the second quarter of 2026.
Despite the short-term boost from the US, Kossan continues to face significant industry-wide hurdles.
CIMB Securities said continuous growth of the Malaysian ringgit against the US dollar remains a concern for exporters.
HLIB Research trimmed its forecasts for Kossan by 7.9%/5.4% for the financial year ending Dec 31, 2026 (FY2026)/FY2027, primarily to factor in a lower RM/USD assumption of 4.05 (from 4.15) from 1QFY2026 onwards.
It expects group earnings to soften quarter-on-quarter in the first 1QFY2026, as the magnitude of price adjustments to pass on currency strength will be limited by rising global supply.
Both research houses remain 'neutral' on the stock, with both CIMB Research and HLIB Research maintaining 'hold' calls, with target prices of RM1.15 and RM1.05 respectively.