KUALA LUMPUR: The recent depreciation of the US dollar against the ringgit is anticipated to continue presenting challenges for Top Glove Corporation Bhd, even with the company's price increase of US$1 to US$2 per 1,000 pieces for orders starting next month.
Public Investment Bank Bhd (PublicInvest) noted that the impact of the weaker US dollar is likely to be more significant in the first quarter of 2025 (1QFY25).
"Nonetheless, Top Glove remains on track to expand its production capacity by 6.7 per cent to 64 billion pieces annually, positioning the company to capitalise on rising sales volumes.
"This was driven by the shift of US orders to Malaysian manufacturers amidst regulatory challenges faced by China and the forthcoming 50 per cent tariff hike," it said in a note.
As such, PublicInvest has cut its financial year 2025 to 2026 (FY25-FY26) earnings forecasts by six to 24 per cent.
The firm said this was after accounting for lower ringgit-denominated revenue, which is partly mitigated by approximately 50 to 60 per cent US dollar-denominated total costs and a higher utilisation rate.
Overall, the firm maintained a 'Neutral' call on Top Glove, with a revised target price of RM1.12.
For the fourth quarter ended Aug 31, 2024 (4Q24), Top Glove reported a narrower net loss of RM3.6 million compared to RM463.1 million in 4Q23, mainly due to a higher sales volume and average selling prices (ASPs).
PublicInvest noted that it observed a 13 per cent rise in natural latex prices due to adverse weather conditions, while nitrile latex prices declined two per cent in October 2024.
"The weakening of the US dollar against the ringgit in August 2024 resulted in a total of RM26 million in realised and unrealised foreign exchange losses," it said.
Meanwhile, Top Glove's revenue grew by 31.2 per cent in 4Q24 to RM835.3 million, driven by a 31 per cent increase in sales volume during the period.
"The growth was mainly attributable to customer order replenishments and the diversion of US orders to Malaysian players.
"Top Glove's blended ASPs rose by three per cent to US$19.7 per 1,000 pieces, while the utilisation rate improved to 60 per cent in 4Q24, up from 45 per cent in 3Q24 based on a total annual capacity of 60 billion pieces," the firm noted.