TOPGLOV: Glove Manufacturer Surpasses Forecasts on Operational Strength, Analyst Rating Upgraded

A leading global glove manufacturer recently delivered a robust financial performance, exceeding analyst expectations for its fourth quarter and full fiscal year 2025 core earnings, primarily driven by significant operational efficiencies and increased plant utilisation. While the reported core PATAMI of MYR24.9 million for 4QFY25 brought the full-year figure to MYR24.1 million, comfortably surpassing RHB’s forecast of MYR2.6 million, it fell short of the market consensus of MYR59 million. Following these results, RHB has upgraded its recommendation for the stock to Neutral from Sell, revising its target price upwards to MYR0.61 (from MYR0.54).

Performance Review

The company demonstrated significant operational improvements, with core PATAMI exceeding RHB’s estimates largely due to lower operating expenses and enhanced utilisation of its manufacturing plants. Sales volumes for latex gloves saw a meaningful 25% quarter-on-quarter (QoQ) increase, while nitrile glove volumes also grew by 9% QoQ, propelled by stronger demand, particularly from the US market. This resulted in an impressive 18% QoQ rise in overall sales volumes, pushing plant utilisation to 71% in 4QFY25. A final dividend per share of 0.48 sen was declared, equating to a 35% dividend payout ratio.

Strategic Cost Efficiencies

Despite a slight decline in blended average selling price (ASP) to USD18 (from USD19), primarily driven by a steeper drop in latex glove ASP (-9% QoQ), the company strategically reduced latex glove ASPs to maintain competitiveness and capture market share in non-US markets. This move was facilitated by a 14% QoQ reduction in latex concentrate prices. Management highlighted that the company’s production costs and pricing are now largely on par with Chinese competitors, affirming improved cost competitiveness. They also noted that Chinese expansion outside China typically incurs higher costs, limiting it as a major threat.

Future Outlook and Capacity Plans

Looking ahead, management expressed optimism, noting that plant utilisation has risen to 75% in recent months, supported by stronger sales momentum. The group plans to reactivate 2 billion pieces of idle capacity by the first half of fiscal year 2026 to meet growing demand. Raw material and natural gas prices are expected to remain relatively stable. RHB has revised its FY26-27F earnings forecasts upwards to MYR160 million and MYR192 million (from MYR32 million and MYR70 million), reflecting higher utilisation assumptions of 75% and 78%, respectively. A FY28F earnings forecast of MYR215 million was also introduced.

Investment Bank’s Assessment

RHB acknowledged the company’s improving cost structure and operating leverage, which are expected to support a gradual earnings recovery. While industry headwinds are anticipated to persist into 2026 amidst intensified competition, the revised target price of MYR0.61 incorporates a 2% ESG premium and implies 1.04x P/BV, at -1.5SD from the 3-year mean. Key risks highlighted include fluctuations in USD/MYR exchange rates, glove ASPs, and variations in utilisation rates and raw material prices. The upgrade to Neutral reflects a belief that current valuations are fair following the earnings reassessment.