TOPG: Operational Efficiencies Propel Improved Profitability
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A prominent player in the rubber products sector is demonstrating resilience and an uptick in its financial performance, with analysts noting operational efficiencies and a recovery in sales volume as key contributors. The company is set to announce its 4QFY25 quarterly results on October 9, with profitability projected to show a favorable improvement from the previous quarter.
Performance Review
The anticipated rise in profitability for the fourth quarter of fiscal year 2025 is primarily driven by a resurgence in sales volume coupled with the easing of raw material prices. These combined factors have led to enhanced cost efficiencies, allowing the company to strengthen its margins from earlier periods. The expected 4QFY25 core net profit is projected at MYR3.4 million, contributing to a full-year FY25F core net profit of MYR2.6 million, reflecting a strategic navigation of market dynamics.
Navigating Market Headwinds
Despite the positive trajectory in operational aspects, the company continues to operate within a challenging market environment. Average Selling Prices (ASPs) are expected to remain under pressure, a trend exacerbated by an increasingly competitive landscape. New manufacturing capacity, particularly from Chinese manufacturers in Indonesia, is slated to commence operations in October 2025. These new entrants are expected to offer generic gloves at significantly lower prices, potentially impacting Malaysia’s export market share in key regions such as the US.
The company has also faced periods of softer utilization, which, alongside persistent challenges in cost pass-throughs, a generally rising operating cost environment, and unfavorable foreign exchange movements (such as the weakening of the USD against the MYR), presents ongoing hurdles. However, the reported improvements indicate proactive management of these external pressures.
Future Outlook and Investment Perspective
Looking ahead, while competitive pressures and cost fluctuations are expected to persist, the company’s focus on operational improvements and disciplined cost management is viewed positively. Investment bank TA SECURITIES has issued a “BUY” recommendation for the company’s shares, setting a target price of RM0.25. This target price represents a 25.0% upside from the last traded price of RM0.20, reflecting confidence in the company’s strategic positioning to capitalize on demand recovery and effectively manage its cost base amidst evolving market conditions.
