Top Glove faces more competition from China

PETALING JAYA: Top Glove Corp Bhd may experience a slight slowdown in glove demand in the third quarter of its financial year ending Aug 31 (3Q25) as buyers from the United States had already been buying gloves ahead to the of higher US tariffs on Chinese gloves.

As a result of this, the glovemaker is likely to see lower average selling prices (ASPs) for its products in 3Q, CIMB Research said.

The research house attributed this to the advance-buying activity by US customers prior to the implementation of higher US tariffs on Chinese glove makers that came into effect Jan 1.

“In addition, we believe that Top Glove faces stronger competition in non-US markets, with Chinese glove makers shifting their focus towards sales to non-US markets after the implementation of higher US tariffs,” the research house said in a report.

In 2Q25, the glove maker posted a core net profit of RM27.8mil, brining 1H25 core net profit back to the black at RM28.4mil compared with the same period a year ago.

This came on the back of a more conducive supply-demand dynamics for gloves, which led to increases in both prices and sales volume.

However, CIMB Research said it expects an improvement in the operating environment from 4Q25 onwards with the front-loaded purchases by US-based customers expected to be fully utilised by June this year.

The research firm keeps its “hold” call on the stock with a lower target price of 95 sen.

Most analysts are still cautious, having “hold” and “sell” ratings on the stock.

AmInvestment Bank Research (AmInvest Research), which maintained its “sell” call with lower target price of 68 sen said the glove maker’s current valuation had moved ahead of fundamentals.

This is despite the recent sharp share price correction.

AmInvest Research said, while the company had posted a turnaround, it was below expectations.

While sales volumes are expected to be primarily boosted by volume growth in the US market, the non-US market is expected to experience stiffer competition as Chinese glove manufacturers are flooding the European market with very competitive prices.

“Management maintains a target sales volume of 43 billion pieces for FY25. The volume for 1H25 was around 19 billion pieces, which is equivalent to the 45% of its full year target,” said AmInvest Research.

Meahwhile, RHB Research upgraded the stock from “sell” to “buy”. However it lowered the stock’s target price to RM1.06 from RM1.10.

“Top Glove now trades at 1.6 times price-to-book or 0.3 standard deviation below its three-year historical mean of 1.7 times.

“Looking beyond May, we expect sales volumes to pick up gradually when the US channel inventory is depleted.

“Following the recent share price correction, we think the valuation is undemanding, as such valuations last traded prior to the tariff announcements in May 2024 and September 2024,” added RHB Research.

The research house said that Top Glove’s management guided that sales volumes hit a trough in February, but are likely to resume positive growth in the March to May period.