Hartalega, Kossan, Supermax, Top Glove: Navigating US Tariff Changes and a Challenging Rubber Glove Market

Malaysia’s Exports Subject to 19% U.S. Tariff

The White House said that Malaysia’s exports to the US will be subject to a 19% tariff. Meanwhile, all goods that are considered to have been transshipped to avoid applicable duties will be subject to 40% tariff.

The key changes to global glove manufacturers, who are subject to these customised tariff rates are as follows:

Figure 1: Changes in Tariff Rates

Source: The White House, TA Securities

US is the Largest Consumer of Gloves

To recap, the estimated annual consumption of medical gloves in the US is approximately 113bn to 132bn gloves in 2025, accounting for 30-35% of global glove demand. Based on our channel checks, Malaysia’s estimated market share of medical gloves in the US has increased to approximately 60% in 1H25, compared to 44% in Dec-24. This is driven by the US tariffs on Chinese-made medical gloves (rising from 7.5% to 50% in Jan-2025 and is currently at 80%).

For glove manufacturers under our coverage, Hartalega’s exposure to the US market is the highest at 57%, followed by Kossan (c. 52%), Supermax (c. 28%) and Top Glove (26%).

Figure 2: Estimated Market Share in the US

Source: Companies, TA Securities

Figure 3: Estimated Supply/Demand

Source: Companies, TA Securities

Our View

We are mildly negative on the latest tariff updates as Malaysia’s pricing advantage has reduced significantly against other neighbouring Southeast Asian countries (see figure 1). Currently, Thailand, Indonesia and Cambodia match Malaysia rate at 19%, while Vietnam is subject to a 20% duty.

On the flip side, we expect Malaysia’s market share to remain at 60% in 2025 as the tariff rates for competing nations are very similar. However, we expect customers to continue to push back in terms of cost sharing as oversupply remains. Currently, Malaysia companies’ utilisation rates are still well below the optimum levels. For instance, Hartalega is running at 69% while Top Glove is at 61%, based on the lastest quarterly numbers. Besides that, big China glove manufacturers like Intco and BlueSail will continue to expand into Vietnam, Indonesia and Cambodia, which will result in a higher supply. We note that Intco’s Vietnam pricing is expected to be at least 15% higher than their Chinese manufacturing plants.

All in all, we believe the trade uncertainty is not over yet as tariff rates/negotiations between China and US are on-going. We would not discount the possibility of further target price cut for stocks under coverage if China is able to get a good tariff deal. Note that China is Malaysia’s largest competitor in the glove industry.

Figure 4: Ex-Tariff ASP Assumptions

Source: TA Securities

Impact

No change to our earnings estimates at this juncture.

Recommendation

Maintain our Underweight stance on the glove sector as the global oversupply is expected to persist for at least the next three years amid increasing competition from Thailand, Indonesia and Vietnam. We believe that the margins for the glove industry would not revert to pre-pandemic for the foreseeable future. Furthermore, Malaysian glove players are likely to continue losing market share in the non-US markets to the Chinese manufacturers. We maintain our Buy recommendation for Kossan (TP:RM1.63), Hold on Hartalega, (TP:RM1.58), Supermax (TP: RM0.62) and Sell on Top Glove with a TP of RM0.72.

Figure 5: Earnings & PAT Margin Still Well Below Pre-Pandemic Levels (2019)

Source: Companies, TA Securities

Figure 6: Valuation and Changes to TP

Source: TA Securities

Figure 7: Hartalega Forward PB

Figure 8: Kossan Forward PB

Figure 9: Supermax Forward PB

Figure 10: Top Glove Forward PB

Figure 11: Glove Share Price Performance vs. KLCI Since the 50% Tariffs Announcement in September 2024

Peer Comparison

Sector Recommendation Guideline

• OVERWEIGHT: The total return of the sector, as per our coverage universe, exceeds 12%.
• NEUTRAL: The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
• UNDERWEIGHT: The total return of the sector, as per our coverage universe, is lower than 7%.

Stock Recommendation Guideline

• BUY: Total return of the stock exceeds 12%.
• HOLD: Total return of the stock is within the range of 7% to 12%.
• SELL: Total return of the stock is lower than 7%.
• Not Rated: The company is not under coverage. The report is for information only.

Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.

ESG Scoring & Guideline

• ★★★★★ (≥80%):
  Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions.
  +5% premium to target price
• ★★★★ (60-79%):
  Above adequate integration of ESG factors into most aspects of operations, management and future directions.
  +3% premium to target price
• ★★★ (40-59%):
  Adequate integration of ESG factors into operations, management and future directions.
  No changes to target price
• ★★ (20-39%):
  Have some integration of ESG factors in operations and management but are insufficient.
  -3% discount to target price
• ★ (<20%):
  Minimal or no integration of ESG factors in operations and management.
  -5% discount to target price