Recovery in glove sector ongoing but threats linger

PETALING JAYA: While the glove sector’s recovery is ongoing, threats are still lingering, according to TA Research.

The research house, which has an “underweight” stance on the sector, said despite the existing overcapacity situation, Chinese manufacturers are expanding into South-East Asia markets such as Indonesia and Vietnam.

The current estimates indicated that China could add 60 billion to 80 billion pieces of new capacity outside of the country in the coming years.

“As a result, any meaningful recovery is unlikely before end-2027,” TA Research said adding that the global oversupply would result in highly price-sensitive customers.

However, the research house did not expect the glove average selling price (ASP) to increase in the financial year 2026 due to persistent oversupply and low Nitrile Butadiene Rubber (NBR) raw material prices.

Chinese producers are currently pricing their gloves at US$14 to US$15 per 1,000 pieces, while their South-East Asian facilities in Indonesia are selling at US$16 per 1,000 pieces.

“These ASPs would remain lower and more competitive than those of Malaysian players who are selling at US$17 to US$18 per 1,000 pieces,” the research house added.

Although Malaysian players will benefit from higher ASPs in the US market, TA Research noted that non-US markets are expected to remain challenging as “Chinese suppliers continue to flood the market with cheaper products.”

Additionally, the strengthening ringgit is negative for Malaysian exporters as passing on higher costs is difficult amid strong customer resistance and a wide range of available alternatives.

The research house said: “Our sensitivity analysis indicates a 4.2% negative impact on earnings for every five sen appreciation of the ringgit against the US dollar.”

Within its universe, TA Research has a “buy” call on Kossan Rubber Industries Bhd with a target price of RM1.30 per share.

“We favour Kossan as it has demonstrated the strongest and quickest recovery among its peers.

“The group’s latest profit after tax margin stood at 8.6% in the third quarter of 2025 compared with 10.1% in 2019, while its balance sheet remains robust with RM1.6bil in cash and investments as of September 2025,” it added.

It has “hold” calls on Hartalega Holdings Bhd with a target price of RM1.07 and Supermax Corp Bhd, at a target price of 35 sen, as well as a “sell” on Top Glove Corp Bhd with a target price of 62 sen respectively.