INVESTMENT BANKS POSITIVE ON TOP GLOVE AMID EXPECTED SALES GROWTH AS INVENTORY DEPLETES

KUALA LUMPUR, March 21 (Bernama) -- RHB Investment Bank Bhd (RHB IB) has upgraded Top Glove Corporation Bhd to a ‘buy’ call from a ‘sell’ call, citing potential improvements in sales volumes by June, the fourth quarter of the financial year 2025 (4Q FY2025), as United States (US) customers’ inventory levels are fully depleted.

Following the latest results, RHB IB has raised its earnings forecast for Top Glove for FY2025-2027 to RM39 million, RM102 million, and RM225 million, up from RM13 million, RM35 million, and RM199 million, respectively.

This revision aligns with the company’s updated volume sales assumptions, increasing from 40.9 billion to 42 billion gloves.

Despite the earnings upgrade, RHB IB has slightly lowered its target price (TP) to RM1.06 from RM1.10, citing key risks such as a decline in the average selling price (ASP) of gloves, slower-than-expected demand recovery, lower utilisation rates, and higher raw material costs.

Meanwhile, Kenanga Investment Bank Bhd has maintained a 'market perform' rating on Top Glove, with a TP of 93 sen, reflecting temporarily lower visibility on orders, as investors may adopt a wait-and-see approach.

"We have cut our FY2025-2026 net profit forecast by 31 per cent to 20 per cent as we now anticipate lower earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin of 13 per cent, down from 14.5 per cent,” Kenanga stated in its note.

It also applied a 10 per cent discount to the industry average due to Top Glove’s lower exposure to the US market, which limits its pricing power.

However, Kenanga noted that stronger-than-expected global demand for gloves, driven by rising hygiene standards and health awareness, along with changes in tariffs and extended cost-cutting by Chinese manufacturers to outprice competitors, could present upside risks.

Public Investment Bank Bhd (PIVB) highlighted that Top Glove remains on track to expand its production capacity by three per cent to 64 billion pieces annually, with a target to reach 70 billion pieces annual running capacity by the end of FY2025.

“The recovery in US sales is expected in the coming months as frontloaded inventory diminishes,” PIVB stated.

However, the bank remains cautious about ASP trends, pointing out that Chinese glove players continue to sell at about a 15 per cent discount compared to their Malaysian counterparts.

Top Glove’s latest financial results fell below both PIVB’s and market consensus estimates.

"The discrepancy in our forecasts was mainly due to the lower-than-expected sales volumes,” PIVB explained. 

As a result, it has revised its FY2025-2026 earnings forecasts downward by 15 per cent factoring in weaker sales volume from non-US customers and the likelihood of flat or declining ASPs due to intensified pricing competition from Chinese manufacturers.

PIVB reiterated its 'neutral' call on Top Glove, lowering its TP to 96 sen from RM1.20.

-- BERNAMA