KUALA LUMPUR: Top Glove Corporation Bhd's sales volume growth momentum is expected to be sustained into 2025 due to increased inventory restocking and potential shifts in trade caused by United States (US) tariffs on China, said RHB Research.
In a research note, RHB Research said that natural latex prices are expected to increase 10 per cent quarter-on-quarter (q-o-q) in the coming quarter, offset by the seven per cent decline in nitrile butadiene rubber (NBR) prices.
"We expect the favourable industry operating dynamics to sustain moving forward, underpinned by healthy demand recovery, easing price competition risks, as well as customers being more receptive to the average selling price (ASP) increase.
"That said, the impact of the strengthening ringgit should be sheltered by the ASP increase as Malaysian gloves makers are in the discussion stage to raise prices to translate the effect of the weakening US dollar to customers," it said.
RHB Research said Top Glove's core loss narrowed q-o-q to RM42.6 million in the fourth quarter of its financial year ended Aug 31, 2024 (4Q FY2024), bringing its FY2024 core loss to RM229 million, which is below expectations.
"Despite the weaker-than-expected results, we take cognisant of the notable improvement in operating dynamics and management's ongoing commitment to streamline operating efficiency that have enabled the group to be in a better position for a turnaround," it said.
RHB Research maintained its "buy" with a new discounted cash flow (DCF)-derived target price (TP) of RM1.28 from RM1.26 previously.
Meanwhile, MIDF Amanah Investment Bank Bhd said Top Glove's path to profitability was partially derailed due to stronger ringgit, reflected in the glove maker's 4Q FY2024 results.
"In anticipation of continuous strength in the local currency, we expect the impact of unfavourable foreign exchange (forex) to persist.
"This, however, could be negated by potentially higher sales from the US following its imposition of higher tariffs on Chinese glove manufacturers," it said.
"Nonetheless, we do not discount there could be a potential impact to sales outside of the US where the latter could be redirecting its sales effort," it added.
MIDF kept its "sell" recommendation on Top Glove with an unchanged TP of RM0.82.