Kenanga Research kept its 2025 and 2026 forecasts for Top Glove unchanged.
PETALING JAYA: Top Glove Corp Bhd
is optimistic about a strong sequential rebound in its earnings recovery for the second quarter of 2025 (2Q25), says Kenanga Research.
Following a recent meeting with the research house, Top Glove said the recovery would be due to the absence of high-priced inventory, a slight increase in average prices for its products and favourable foreign exchange rates.
However, the group expects flattish sales volume in January and February due to the front-loading effects of the US customers purchasing from Chinese glove makers before the imposition of a 50% tariff effective this month compared with a 8% to 10% month-on-month (m-o-m) growth in November and December 2024.
“Thereafter, Top Glove expects orders from the US customers to accelerate from end-February 2025,” Kenanga Research said in a report yesterday.
Other key takeaways from the meeting included the effect of rising prices being felt only after February due to the front-loading effects of US customers purchasing from Chinese glove makers.
The research house said, “We conservatively assume an ASP of US$20 per 1,000 pieces in our earnings model.”
Top Glove, meanwhile, had been optimistic that ASPs would inch up gradually by 3% each month from November 2024 onwards.
However, due to the lag effect, price increases were only felt gradually starting from December 2024. Typically, prices for the US market are higher by US$1 per 1,000 pieces compared with the rest of the world.
Kenanga Research noted Top Glove highlighted that its exports to the United States are continuing to show improvement, rising 21% quarter-on-quarter in 1Q25.
US sales accounted for 18% of total group volume, above the 15% mix for 2024, but still below the pre-pandemic average of 20% to 30%.
At the same time, Top Glove is optimistic that the strong growth momentum will be sustained, as customers continue replenishing their depleting glove stockpiles.
“The group continues to see m-o-m uptrend in sales volume in December 2024 and expects orders from the United States to pick up in subsequent quarters, underpinned by inventory rebuilding by distributors and boosted by US tariffs on Chinese gloves,” the research house said.
Presently, the group’s plant utilisation rate is 66% compared with 60% in 4Q24 and 45% in 3Q24.
Kenanga Research kept its 2025 and 2026 forecasts for Top Glove unchanged with a “market perform” call on the stock at a target price of RM1.30.
