PETALING JAYA: The average selling prices (ASPs) of rubber gloves are expected to normalise in the first quarter or early second quarter of 2022, says TA Securities Research.
In addition, the ASPs for gloves would still be higher compared with the pre-pandemic levels due to the higher cost of production, additional costs of standard operating procedure (SOP) compliance and higher nitrile raw material prices, said the research house in its latest report.
Going into October, TA Securities Research said the ASPs for nitrile and latex gloves are expected to be at US$35 to US$40 (RM146 to RM167) per 1,000 gloves and US$25 to US$30 (RM104 to RM125) per 1,000 gloves respectively.
This will translate into 8% to 12% month-on-month decline, it added
Nitrile glove ASP is expected to drop at a slower pace, once it touches the US$30 (RM125) per 1,000 gloves mark, according to the research house.
“At this level, we believe that major customers, who have been waiting for glove prices to stabilise, would gradually come back to the market,” said the research house.
In tandem with the drop in ASPs, lower lead time and delay in plant construction due to Covid-19 restrictions, glove manufacturers have scaled down their expansion plans.
Top Glove Corp Bhd has revised its end capacity lower to 100 billion gloves by 2021 (versus 111 billion previously), 111 billion in 2022 (versus 138 billion previously) and to 137 billion in 2023 (versus 175 billion previously).
The progress of Supermax Corp Bhd’s plans to build a glove manufacturing plant in the United States is slower than expected.
Also, the first line (plant eight) of Hartalega Holdings Bhd’s NGC 1.5 glove manufacturing facilities is expected to commence only in Q1’ 2022 compared with the previous target of Q4’2021 and maiden contribution from Kossan Rubber Industries Bhd’s Bidor plant in Perak is expected to be in 2023 instead ofl 2022.
Meanwhile, TA Securities Research did not expect the government to impose windfall taxes on glove makers.
The Finance Ministry had said that the sector had already contributed positively to the national economy in terms of tax revenue and job opportunities.
“Note that the big four glove manufacturers had contributed RM1.6bil in taxes in 2020, while the industry is estimated to have paid about RM2.6bil in corporate tax,” said the research house.
It does not discount the possibility of another donation to the government, similar to Budget 2020, whereby the big four glove makers contributed RM400mil to the Covid-19 fund.
Following the revision in its earnings forecast, TA Securities Research maintained its “buy” call on Hartalega and Kossan with lower target prices of RM7.11 and RM2.71 respectively.
However, it maintained a “sell” call on Supermax with a lower target price of RM1.80 and Top Glove with an unchanged target price of RM2.60 per share.