Glove demand to remain stable post-Covid-19
KUALA LUMPUR: The glove sector’s demand has been projected to remain stable postCovid-19, but analysts believe that average selling prices (ASP) will begin easing after the first half of 2021 (1H21).
AmInvestment Bank Bhd (AmInvestment Bank) gathered that the Malaysian Rubber Glove Manufacturers Association (Margma) expects demand for gloves to remain positive postCovid-19.
“The main reason is the pandemic has raised much awareness on personal hygiene, thus resulting in a higher usage of gloves,” the research firm said.
“In developing countries, the usage of gloves is increasing with a wider adoption of gloves usage from non-medical industries such as food and beverage (F&B), services, retail etc.”
Beyond the pandemic, the research firm anticipated a structural change in the way gloves are used, forming a new normal where glove usage per capita will rise as hygiene measures become stricter.
It noted that this is expected to apply not only in the healthcare sector but also across different industries like F&B.
“The glove consumption per capita in emerging markets such as India and China is still low at around two to six gloves as opposed to about 100 to 280 gloves for developed countries.”
Although AmInvestment Bank held the view that demand for gloves will remain stable post-Covid-19, the research firm expected ASP to decline as there is no longer a rush for gloves compared to what happened at the beginning of the pandemic.
“Nonetheless, we expect ASP will stabilise at a higher level than the pre-pandemic level due to the broader usage of gloves.
“Moreover, capacity expansion from glove companies will be able to cope with the future demand.”
The research firm reckoned the average selling prices (ASP) will begin to ease after 1H21 following the strong increase over the past nine months, and are already priced in.
“Moreover, we are cutting our target price earnings ratio (PER) by 10 per cent across the board to take into account the risk of a down cycle in the sector as a result of successful rollouts of Covid-19 vaccines.
“While we believe that glove makers’ fundamentals remain steady for the next few years, they offer limited upside at their current share prices. Hence we advise investors to accumulate at lower levels.”