Analysts cautious on Top Glove’s forward trajectory
KUCHING: Analysts are feeling cautious about Top Glove Corporation Bhd’s (Top Glove) forward trajectory amid the global transition to the endemic stage.
“With the current shift of the global economy to the endemic stage, the group is undergoing a transition period due to demandsupply imbalance, where it expects to see the profit after tax (PAT) margin normalising in the near-term after reaching a historic high in financial year 2022 (FY22),” the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said following a company visit at Top Glove.
“Nonetheless, the group expects demand to grow following the period of transition, albeit at a moderate pace, due to higher hygiene awareness and increased usage in new industries.”
MIDF Research gathered that due to entry of new suppliers in the nitrile glove segment, the group expects stiff competition in this segment.
The research arm noted that in contrast, the natural rubber margin has been recording better performance due to stronger demand, compared to the nitrile rubber margin.
“Additionally, the cost structure for nitrile gloves has been on the rise, in line with the higher crude oil prices.
“Coupled with the higher competition, the cost passthrough for the nitrile rubber segment is more challenging at this juncture, thereby affecting margins.”
The research arm also gathered that in light of the current glove demand and supply imbalance, the group has deferred some of their expansion plans.
“Additionally, the current transition to the endemic stage and higher vaccination rates also poses uncertainty to the group’s expansion plans.
“However, we think that the increase in the glove imports from US post- Customs and Border Protection will continue to improve demand and enable the group to recapture its market share in the country, which could potentially resume its expansion plans.”