PETALING JAYA: Lee Swee Kiat Group Bhd
(LSK) could see further bottomline gains ahead if its plans for a higher profit margin becomes a reality.
CGS-CIMB Research said the group expects its strong sales momentum to continue in the financial year 2023 (FY23) given strong demand for mattresses in the local market.
“This is anticipated to come from end-consumers and via business to business clients.
“Also, riding on its strong product proposition as well as lower competition in the market, where there are lesser of a supply of bedding product manufacturers due to weak economies of scale,” the research house said in its latest report.
The group is also confident of posting stronger margins by launching more products with value-added offerings such as organic certified latex bedding goods.
CGS-CIMB Research pointed out that this is unlike the usual of gaining margins by simply raising selling prices for existing products.
“In addition, it expects lower input costs to translate to margin gains in FY23,” it noted.
LSK also expects export sales to rebound this year, particularly in the second half of the year, boosted by declining in freight charges that was seen since late last year.
This would help increase exports competitiveness and with more anticipated participation in international trade fairs, added CGS-CIMB Research.
“We gather that LSK is currently talking to several new export clients, and looking to finalise orders in the near-term.
“Do note that export sales had declined 32% year-on-year in FY22,” said the research house.
“There are no changes to our FY23 to FY25 earnings per share estimates.
“We keep our “add” call, with a target price of RM1.23 per share based on a 10.4 times forecast 2024 price-to-earnings ratio,” it said.
