Top Glove upgraded to “Buy” on improving sector prospects

KUALA LUMPUR: Top Glove Bhd could be seeing better quarters ahead amid improving demand for Malaysian rubber gloves, says Affin Hwang Capital research.

The research house upgraded the counter to “buy” from “sell” previously, citing normalising buying patterns as distributors were previously stocking up on China gloves in anticipation of the US tariff hike.

For the first nine months of the year, Chinese medical gloves imported into the US rose 45% with a 14% market share. Since the 15% tariff on Chinese glove came into effect in September 2019, it is expected to boost Malaysian manufacturers’ market share in the coming months.

Affin Hwang raised its target price on Top Glove to RM5.20 from RM4.10 previously given its more positive stance on the sector and the glove maker’s improving outlook.

Chinese manufacturers have made significant gains in their glove exports to the US, with their market share rising from 10.2% in 2018 to 14.2% in September 2019.

While Malaysia remains the market leader with 74.2% market share, the competition from the Chinese impacted overall demand from local players such as Top Glove.

Affin Hwang noted also that there have been concerns over rising competition from Thailand’s Sri Trang Gloves, which has beein aggressively building capacity in preparation for an IPO in 3Q20.

However, it said the company is unlikely to cut prices further to compete for market share gains as its new capacity will only be ready by 2H20.

Source: TheStar