Despite a ‘strong’ set of 1HFY2021 ended June earnings, RHB Group Research has kept its ‘neutral’ rating for Riverstone Holdings with an unchanged target price of $1.30.
See: Riverstone reports 656.8% earnings jump
In an August 6 research note, RHB’s Singapore research team says Riverstone’s 1HFY2021 results were in line with their estimates, with the company reporting a surge in earnings on higher average selling prices (ASPs) and volumes.
But looking ahead, the team anticipates earnings will be negatively impacted due to a weaker ASP outlook for gloves.
“We believe that long-term glove consumption growth remains solid due to higher hygiene awareness globally. However, we believe ASPs have peaked in 1QFY2021 due to rising competition from the new supply of gloves in the market,” the team explains.
The team also highlighted the company’s plan to complete Phase 7 of its expansion for FY2021, which will increase its capacity by 14% to 12 billion pieces per annum, up from its current total capacity of 10.5 billion pieces per annum.
The team discloses that its earnings estimates incorporate blended ASP assumptions of US$65 ($88), US$50 and US$39 per 1,000 pieces of gloves for FY2021, FY2022 and FY2023 respectively.
Shares in Riverstone closed 6 cents or 4.96% higher at $1.27 on August 6.
