KUALA LUMPUR: CIMB Equities Research is maintaining its Add and higher target price of RM10.80 for Top Glove Corporation.
It said on Friday the target price was still based on an unchanged 22.6 times CY19F price/earnings (P/E) – which is a 20% discount to its target P/E of 28 times for Hartalega
.
“We continue to like Top Glove for: i) being a key beneficiary of the strong demand for rubber gloves as the world’s largest glove producer, ii) margin expansion from increasing economies of scale, and iii) its growing manufacturing capabilities,” it said.
CIMB Research deemed Top Glove’s core net profit of RM210.1m for the first half ended Feb 28, 2018 to be above expectations, at 50.3% of its FY18F estimates. This is on the back of expectations of a stronger 2HFY18.
The 34.3% on-year growth in 1HFY18 core net profit was due to: i) increase in glove sales, ii) higher selling prices (ASPs), and iii) lower raw material prices, mainly latex.
“Despite a weaker US$/ringgit, Top Glove should record sequentially-stronger earnings, with contributions from Aspion beginning 3QFY18 and global glove demand staying robust.
“We raise our FY18-20F EPS by 5.7%-7.9% to account for: i) lower latex prices, ii) higher sales volume, and iii) increase in average selling prices,” said the research house.
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