ASPs for gloves is expected to decline in coming quarters, says CGS-CIMB

KUALA LUMPUR: Average selling prices (ASP) for gloves, which peaked in the first quarter (Q1) of 2021, are expected to decline going forward, CGS-CIMB Research said.

This is due to aggressive expansion plans from both new and existing glove makers, slower buying patterns from customers and diminishing spot orders.

CGS-CIMB Research expects ASPs to reach US$77, US$39 and US$29 per 1,000 pieces in 2021, 2022 and 2023 respectively.

“Still, we are of the view that ASPs will decline to pre-Covid-19 levels (US$21-US$24 per 1,000 pieces) given the higher production costs and higher consumption patterns,” it said in a note today.

CGS-CIMB Research said while its findings indicate that glove supply surplus is unlikely to happen for the next two to three years, the pace of incoming supply of gloves may be ahead of global demand growth from 2024 onwards.

This will be in the event that sector capacity growth continues at above 20 per cent per annum, global glove demand grows below 10 per cent per annum and the top seven listed glove makers’ market share of the global glove supply is at 60 per cent or below annually.

“While we turn neutral on the sector’s prospects, current valuations have accounted for the weaker earnings prospects, in our view.

“This is supported by solid dividend yields, strong balance sheets and Malaysia’s dominant position in global glove exports.

“We also believe that ESG (environmental, social and governance) metrics of glove makers, mainly in regards to social compliance, are improving,” it said.

CGS-CIMB Research has downgraded the glove sector to ‘Neutral’ from ‘Overweight’.

Source: NST