TOPGLOV: Glove Manufacturer Boosts Utilization, Manages Costs Amidst Sector Challenges

A recent investment bank research report anticipates a marginal quarter-on-quarter improvement in a major glove manufacturer’s 4QFY25 earnings. This expected uplift is primarily attributed to enhanced plant utilisation and robust sales volumes, although these positive impacts are somewhat tempered by softer average selling prices (ASPs) and a stronger Malaysian Ringgit against the US Dollar.

Operational Performance and Efficiency

The glove maker is currently operating at approximately 74% utilisation, a notable increase from 61% in 3QFY25. Management has set a target to raise utilisation to 80-85% in FY26, contingent upon a sustained recovery in US market demand. Sales volumes for 9MFY25 stood at 28 billion pieces, with 3QFY25 contributing 9.2 billion pieces, and a stronger sequential increase is projected for 4QFY25. The company’s immediate strategic focus remains on optimising operational efficiency and margin, with a cautious approach to capacity expansion.

Cost and Pricing Dynamics

Raw material costs are expected to remain stable throughout 4QCY25, alleviating cost pressures and enabling the company to pass on savings to customers. Domestic natural gas prices have stabilised after last year’s surge and are anticipated to trend lower into 2026, contributing to contained energy costs. While blended nitrile ASPs in the US market are steady at US$16-17 per thousand pieces, intense competition from Chinese manufacturers continues to cap ASP recovery in other markets. Despite this, management has indicated no further ASP cuts are expected in the US market, citing resilient demand.

Market Outlook and Challenges

Malaysia’s share of the US glove market has expanded to approximately 59% from 44% a year ago, with the subject company holding an estimated 21% share. The US market now represents 26% of its total export volumes. The investment bank projects an improvement in earnings trajectory for FY26-27E, driven by a recovery in both capacity utilisation and sales volume. This recovery is underpinned by anticipated global glove demand, ongoing inventory digestion, and sustained orders from the US market. However, ASP recovery is expected to remain muted due to persistent pricing pressure and intense competition, with blended ASPs stabilising at US$19-20 per thousand pieces. Persistent structural challenges and global overcapacity are expected to continue weighing on sales volume and margins, thereby limiting the full magnitude of earnings recovery.

Investment Bank’s Perspective

The investment bank maintains a HOLD rating on the stock, with a lowered 12-month target price of RM0.59, revised down from RM0.71. This adjustment reflects a reduced Price-to-Book Value (P/BV) multiple to 1.0x, which is 1 standard deviation below its 3-year historical average. The lower valuation is a reflection of the enduring structural challenges and global overcapacity that are anticipated to continue impacting sales volumes and margins. Key risks include shifts in sales momentum and ASPs, fluctuations in raw material costs, and aggressive capacity expansion by Chinese competitors.