Karex upbeat about new high-margin product
PETALING JAYA: Karex Bhd is in a good position to beef up its earnings going forward, partly due to a new high-margin product expected to be launched in its financial year 2025 (FY25).

Besides this, lower production costs and operational efficiencies are expected to further spur the condom maker’s earnings growth despite downside risks.

Kenanga Research said one of its key takeaways from its recent visit to Karex’s manufacturing plant in Hat Yai, Thailand, is that the company remains upbeat on its new product – synthetic condoms that are thinner, feature improved heat sensitivity and require less material to produce.

The research house said the company is currently engaging with key original equipment manufacturers (OEM) clients with a product launch targeted in FY25.

“It plans to add five more dipping lines in its Thai plant (from only two lines for the entire group at present), boosting its annual capacity by 2.5 times from about 200 million pieces at present to approximately 700 million pieces by calendar year 2024.

“It remains hopeful to secure CE certification for compliance with European Union safety, health and environmental protection requirements by June 2024, followed by the United States Food and Drug Administration approval in the first half of 2025,” the research house said.

For its second quarter ended Dec 31, 2023, the company chalked up a higher net profit of RM7.32mil compared with RM2.03mil a year ago. Revenue for the quarter was RM127.37mil against RM128.51mil in the similar quarter in 2022.

The company’s plant in Thailand is the largest of its four plants, with the others in Port Klang, Pontian and Senai in Malaysia.

The Thai plant boasts 25 manufacturing lines with a capacity of 2.5 billion pieces annually. It employs approximately 1,500 Thai workers, making up about 44% of Karex’s total workforce.

The rationale for setting up the plant includes access to labour and input latex at lower costs, a lower corporate tax rate of 20% (versus 24% in Malaysia) and attractive investment incentives.

Karex is enhancing efficiency in its tender business, which accounted for about 16% to the group’s turnover for the first half of its current financial year by automating the testing process to handle standardised client orders.

The firm has already deployed five automated electronic testing machines in its plants in Thailand and Klang, with a testing rate exceeding 200 pieces per minute (versus 40 pieces per minute if done manually).

Additionally, a planned 2.5 megawatt solar installation at its Thai plant, accounting for 45% of its total needs, is expected to reduce the plant’s energy bills by 30% to 50% over the long term.
Corporate News,KarexBhd,NewProductLaunch,SyntheticCondoms,HighMargins,OEMClients,CECertification,FDAApproval
Karex Bhd is in a good position to beef up its earnings going forward, partly due to a new high-margin product expected to be launched in its financial year 2025 (FY25).