TOPGLOV: Earnings Beat Expectations on Operational Efficiencies, Investment Bank Issues ‘BUY’ Recommendation

A recent research report from TA Securities highlights a robust financial turnaround, with the company’s core profit significantly exceeding market consensus. The strong performance was driven by improved operating efficiencies and a substantial increase in sales volumes, particularly in the North American market.

Performance Review

The company reported a core profit of RM85.5 million for FY25, which was in line with TA Securities’ expectations (95.1%) but notably surpassed the consensus forecast by 144.3%. Profit Before Tax (PBT) saw a dramatic surge to RM154.4 million in FY25, a significant improvement from a loss of RM31.3 million in the previous financial year (FY24). This remarkable recovery was attributed to enhanced operating efficiency and a 55% growth in sales volumes across all regions.

Quarter-on-quarter, revenue grew by 7.2% to RM889.6 million, supported by an 18% increase in sales volume. The North American market led this growth with a 58% QoQ volume increase, as customers replenished their inventories. This helped offset heightened competition from Chinese manufacturers in the EU market, where volumes saw declines in Western and Eastern Europe. Plant utilization improved to 71% in 4QFY25, up from 61% in 3QFY25.

Factors Contributing to Success

Despite a blended Average Selling Price (ASP) decline of approximately 5% QoQ, primarily due to lower raw material costs (nitrile and natural rubber latex decreased by 10% and 14% respectively), the company effectively leveraged these cost efficiencies to boost profitability.

Challenges and Mitigations

While overall volumes showed strong growth, declines in European markets and ongoing competition presented challenges. However, the surge in US demand and improved operational metrics, like plant utilization, were key in mitigating these pressures. The company has also resumed dividend payments, declaring a final dividend of 0.48 sen per share for FY25, reflecting a 35% payout ratio.

Future Outlook

Looking ahead to 1QFY26, ASP is projected to remain stable quarter-on-quarter, underpinned by stabilized raw material costs. Management aims to maintain the narrowed ASP gap with Chinese competitors, which currently stands at around 50 sen per 1,000 gloves.

Utilization rates have further improved, reaching 75% in September, driven by rising sales orders across all markets. The group anticipates a 7-10% QoQ volume growth in 1QFY26 and believes full-year volume growth of 20-30% is achievable. To support growing sales orders, the company plans to reopen another factory, adding 2 billion gloves to its annual production capacity, bringing total capacity to 66 billion gloves in 1HFY26, closer to the pre-pandemic levels of approximately 54 billion gloves recorded in FY19.

Investment Bank’s View and Recommendation

Reflecting the company’s strong financial performance and positive future outlook, TA Securities has issued a ‘BUY’ recommendation. The investment bank has set a target price of RM0.25, indicating a potential upside of 25.0% from the last traded price of RM0.20.