Top Glove’s Recovery Fails to Excite Investors, Analysts
Petalings Jayan: Top Glove Corp Bhd’s return to profitability after a torrid time post-pandemic has failed to capture the imagination of investors and research analysts.
The world’s largest natural rubber glove maker remained in the black for the second consecutive quarter following a sharp increase in sales. Prior to that, it had been bleeding red since the financial year ended Aug 31, 2022 (FY2022).
Strong Financial Performance
On Thursday, it announced a net profit of RM30.28 million for the quarter ended Feb 28, 2025 (Q2 FY2025) from a net loss of RM51.2 million a year ago. Revenue soared 61% year-on-year to RM883.65 million due in part to US tariffs on Chinese gloves.
For the first-half year (H1 FY2025), the group rebounded with a net profit of RM35.76 million while revenue jumped 70.2% to RM1.77 billion from RM1.04 billion in the previous corresponding period.
Disappointing Market Reaction
There was little reaction to the news it achieved a second consecutive quarter of profitability. Its shares dipped 1.7% or 1.5 sen to 88 sen at the close on Friday, valuing the group at RM7.19 billion. In fact, the stock has fallen 32.2% year to date.
Analysts’ Views
Top Glove’s core net profit for its first six months accounted for only about 19% of consensus full-year estimates, prompting cuts to earnings estimates by various research houses.
AmInvestment Bank (AmInvest) maintained its "sell" call with a lower target price (TP) of 68 sen as its current valuation has "moved ahead of fundamentals" despite the recent sharp share price correction.
"Chinese manufacturers’ expansion plan outside of China to bypass the (US) tariff will further exacerbate the current glove oversupply situation," it warned in a note on Friday.
Stiffer Competition
AmInvest said the non-US market will experience stiffer competition as Chinese glove manufacturers are flooding the Europe market with very competitive average selling price (ASP) at US$15/carton.
Cost Pressures
On the cost front, it noted the increase in minimum wage effective February 2025 will increase Top Glove’s cost by RM29 million annually.
Industry Outlook
Apex Securities said the glove industry will remain challenging for the next two quarters, as most US customers have completed their frontloading activities before the higher US tariffs kicked in.
Global oversupply could also worsen as China’s manufacturers circumvent US tariffs by increasing production in Southeast Asia, warned the research house, which maintained its "hold" call on the stock.
Conclusion
Top Glove’s recovery has failed to excite investors and analysts, with its shares continuing to fall. The company’s strong financial performance has been overshadowed by concerns over stiffer competition, cost pressures, and a challenging industry outlook.
Frequently Asked Questions
Q: What is the current share price of Top Glove?
A: The current share price of Top Glove is 88 sen.
Q: What is the target price of AmInvest for Top Glove?
A: AmInvest has a target price of 68 sen for Top Glove.
Q: What is the current net worth of Top Glove’s executive chairman Lim Wee Chai?
A: According to Forbes, Lim Wee Chai’s net worth is US$1.1 billion (RM4.86 billion) as of March 21, 2025.