KUALA LUMPUR: Public Investment Bank Bhd (PublicInvest) remains cautious about the average selling price (ASP) trends for rubber gloves moving forward.
The firm said the anticipated decline in raw material prices in the first half of 2025 (1H25) could prompt Top Glove Corp Bhd to maintain flat or marginally lower pricing to prioritise market share.
"Nevertheless, we believe this will be mitigated by a higher sales volume driven by the impending US tariff hike on China medical gloves effective on Jan 2025," it said in a note today.
PublicInvest believes that Top Glove is on track to expand its production capacity by 6.7 per cent to 64 billion pieces annually, underpinned by a sequential improvement in sales volume.
Overall, the firm maintained a "Neutral" call on Top Glove, with a higher target price of RM1.20.
Top Glove reported a net profit of RM5.5 million in the first quarter ended Nov 30, 2024 (1Q25), compared to a net loss of RM57.7 million in 1Q24, mainly driven by a higher sales volume and ASPs.
After stripping out non-operating items, the group's 1Q25 core net loss stood at RM21.9 million.
PublicInvest noted that the results came in below both the firm's and consensus estimates.
"The discrepancy in our forecasts was mainly due to higher-than-expected operating costs.
"We maintain our FY25-FY27 earnings forecasts, as we foresee raw material prices to trend downward in 1H25, giving room for better margins," it said.
Meanwhile, CIMB Securities Sdn Bhd considers Top Glove's 1Q25 results to be within its expectations, projecting the group to record significantly stronger results in FY25.
This is supported by a more conducive operating environment, leading to further increases in sales volume and ASPs.
The firm also expects Top Glove to post stronger qoq results in remaining quarters of FY25, followed by a 132 per cent year-on-year rise in core net profit in FY26 forecast.
The firm said this is mainly premised on its view that the group will continue to benefit from higher global glove demand, especially from US-based customers.
"On top of the increase in US tariffs on Chinese medical gloves starting in 2025, demand for Malaysian-made gloves is also expected to be driven higher by quality concerns with China-made gloves and the depletion of global Covid-19 pandemic–era stockpiles prompting more restocking activities by customers," it added.
With its 1Q25 results in line with expectations, CIMB said it makes no changes to the group's FY25–FY27 earnings per share estimates.
However, the firm downgraded the stock to a "Hold" from "Buy", as it believes that the recent rise in share price had largely priced in Top Glove's improved prospects.