PETALING JAYA: Analysts are positive about Top Glove Corp Bhd
as they expect the glove-making company to experience a turnaround on stronger demand next year.
MIDF Research upgraded the company to “neutral” from “sell”, with a revised target price of RM1.24 from RM0.82.
The research house said, while Top Glove recorded a loss in the first quarter of its financial year 2025 (FY25), the continuous improvement in demand would enable the group to become profit-making.
“This will stem from continuous stock replenishment, higher orders from the United States, as well as higher demand for nitrile gloves. This would also translate to better profit margins,” MIDF Research said in a report.
The research house said it viewed Top Glove’s first quarter results as being in line with expectations and anticipated the group’s plant utilisation rates to improve further in the coming quarters.
However, the research house also said the pace of improvement for Top Glove was slower compared withits peers, which had already reported profitable quarters.
“Given the group’s well-spread revenue base, the positive spillover effect of US tariff hike on Chinese glove companies is less profound compared withits peers. Elevated production costs also remain a concern, although this would be partially addressed by the higher utilisation rate. All this could potentially limit the pace of earnings recovery,” MIDF Research said.
TA Research said it expected Top Glove’s sales volume to grow by 61% in FY25, driven by ongoing stock replenishment activity and increase in sales to US customers.
For the first quarter of its FY25, glove volumes surged by 104% to 10.2 billion gloves, fuelled by replenishment activity across most of the region and increased US orders, ahead of a 50% import tariff on Chinese glove productions.
Top Glove’s management had said the price differential between the United States and non-US market is around US$1 per 1,000 gloves.
“For 2Q25, we expect the average selling price (ASP) to increase by 3% to 5% quarter-on-quarter, driven by higher sales volume to the US market,” TA Research said.
In terms of capacity expansion, Top Glove is on track to increase its running capacity by 66 billion pieces, bringing the total running capacity to 70 million by FY25.
“Overall, we expect the FY25 utilisation rate to be above 70% versus 45% in FY24,” the research house said.
TA Research said it was maintaining its “sell” call on Top Glove with an unchanged target price of RM1.38.
Meanwhile, Kenanga Research said the glove maker returned to the black as it shook off high-cost inventory, despite the impact of higher ASPs only taking effect from 2Q25.
The research house said it guided for an uptick in orders by restocking customers and expects the group to benefit from the recently announced US tariffs on Chinese glove makers in subsequent quarters.
According to Kenanga Research, Top Glove is optimistic that the strong growth momentum will continue, as customers replenish their depleting glove stockpiles, as seen in the uptrend in sales volume in December.
The research house also noted that the positive effects of a rising ASP would only be felt after February 2025 due to the frontloading effects of US customers purchasing from Chinese glovemakers.
“We maintain forecasts and our ‘market perform’ call with a higher target price of RM1.30 from RM1.02. We keep our FY25 and FY26 earnings unchanged in anticipation of stronger earnings in the remaining quarters of FY25 underpinned by pent-up demand,” it said.
