Kenanga Research said there has been an uptick in orders over the past two quarters.
PETALING JAYA: Kenanga Research has kept its “overweight” call on the glove sector, perhaps in contrast to a number of other research houses, saying that its optimism is backed up by a number of factors.
Among these, the research house said there are indications pointing towards a strong demand recovery moving into the second half of 2024 and into next year, underpinned by inventory rebuilding from distributors and faster-than-expected industry consolidation.
“There are also signs that predatory pricing by certain overseas players have diminished as Chinese players’ utilisation has exceeded 90%
“Coupled with the US imposition of tariff ratcheting up to 50% and 100% in 2025 and 2026 respectively, it makes Malaysian glove makers the prime beneficiary,” it said in a note to clients yesterday.
It elaborated that there has been an uptick in orders over the past two quarters, with the rise in demand coming as the inventories of major distributors across all regions have returned to normal levels.
Kenanga Research said Hartalega Holdings Bhd
is expecting to hit sales volume of 2.2 billion pieces of gloves per month in the second half of the financial year ending March 2025.
“Already, Hartalega has seen the first quarter of next year’s financial year (1Q25) orders hitting close to two billion pieces per month compared to 1.5 billion to 1.8 billion pieces per month in 4Q24 and 3Q23,” it noted.
The brokerage said Top Glove Corp Bhd is optimistic that the strong growth momentum will sustain, as customers continue replenishing their depleting glove stockpiles.
It said the group continues to see a monthly uptrend in sales volume in June 2024 and expects customers’ replenishment activity to pick up in subsequent quarters, underpinned by inventory rebuilding from distributors, indicating early signs of potential recovery in demand.
Meanwhile, Kenanga Research revealed that the US historically accounts for 30% to 50% of the sales volume of Hartalega, Kossan Rubber Industries Bhd, Top Glove and Supermax Corp Bhd, while illustrating that a 50% tariff hike is expected to raise the average selling price of Chinese glove producers to US$25 per 1,000 pieces from US$19.
