Maybank turned positive on Malaysian glove stocks and upgraded its sector rating from “negative” to “positive”, which the research house considers a “contrarian rating”.
The upgrade comes in view of improving sales volumes and stabilising raw material prices, said Maybank, despite ongoing challenges of stiff competition.
“While sales volume remains volatile with a shorter order lead time as buyers are in no rush to lock in a contract due to excess supply in the glove market, sales volume has improved significantly quarter on quarter among the Malaysian glove makers,” observed analyst Wong Wei Sum in a report on Tuesday (Dec 12).
He foresees plant utilisation rates to grow from the current range of 35 per cent to 40-45 per cent, to more than 35 per cent to 45-50 per cent, leading to lower production costs ahead.
Noting that raw material prices began stabilising after surging in November 2023, Wong is also expecting glove makers’ natural gas costs to come down potentially from mid-2024, after spiking in Q1 of 2024.
This will cushion the impact on glove makers’ bottom line financials and make pricing more competitive for them, he added.
With the sector rating upgrade, Maybank maintained its “hold” rating on Top Glove but lifted its target price to RM0.80 from RM0.77 to reflect an improved earnings outlook.
Top Glove shares jumped 6.5% in Tuesday’s trading in Singapore.
Comments