Maybank IB Research expects Top Glove to turn around in FY25.
PETALING JAYA: A recent surge in demand for rubber gloves is expected to give Top Glove Corp Bhd
stronger bargaining power in pricing should there be any increases in raw-material or natural-gas prices.
Maybank Investment Bank Research (Maybank IB Research) said the group’s core net loss of RM56mil for its first quarter of financial year 2024 (1Q24) versus RM131mil in 1Q23 and RM89mil in 4Q23 was in line with its expectation.
“We maintain our loss projection for FY24 and expect Top Glove to turn around in FY25,” the research house said in a note to clients yesterday.
“While we appreciate Top Glove for its active cost management, improving sales outlook and projected turnaround by FY25, the share price has outpaced fundamentals and is now 13% above our 80 sen target price (TP),” the research house added.
Maybank IB Research downgraded the stock to a “sell’’ from a “hold” previously.
TA Research, meanwhile, reiterated a “sell’’ call on Top Glove with an unchanged TP of 80 sen.
The research house said the group’s plant-utilisation rate is expected to improve to 40% from about 30% previously.
TA Research believes the increase in latex costs by 4% quarter-on-quarter (q-o-q) due to the wintering season and the expected higher natural gas cost of about 3% in January 2024, will be offset by lower nitrile costs of 5%.
Coupled with the better demand and cost efficiency, Top Glove hopes to achieve a turnaround by the end of 2024.
MIDF Research in its latest report said it sees an improving sales-volume outlook for the company following the resumption of replenishment activities after the depletion of inventories in the health sector.
This, coupled with recent permanent and temporary closures of some manufacturing plants, has lowered production costs per unit, thereby increasing profits for the company.
However, the research house remained cautious about the intense competition from Chinese players and the oversupply situation, which may exert pressure on Top Glove’s pricing flexibility.
“This makes it challenging to fully pass on increased costs, as customers can easily switch to other glove manufacturers offering competitive prices,” said MIDF Research, which has a “neutral” call on the stock with a TP of 84 sen.
Meanwhile, Hong Leong Investment Bank Research (HLIB Research) said it remains optimistic that the operating environment for glove makers has taken a positive turn.
It revised upwards Top Glove’s TP to RM1 a share and upgraded the stock to a “hold’’ from a “sell’’ previously.
Kenanga Research has an “outperform” call on the stock with a TP of 75 sen.
