Top Glove plans to raise ASPs

PETALING JAYA: Despite weak demand, Top Glove Corp Bhd is expected to increase the average selling prices (ASPs) of its gloves soon.

The move by the world’s largest glove manufacturer is in tandem with the anticipation of higher raw material costs so as to pass on some of the cost increases to buyers, according to Hong Leong Investment Bank (HLIB) Research.

“While Top Glove is expecting to raise ASPs gradually going forward, we are not particularly enthusiastic about it, as this is done in anticipation of rising raw material costs.

“Demand has remained relatively weak and utilisation rate is still low at around 30% currently,” it noted, adding that higher electricity and fuel costs had further weighed on Top Glove’s profitability.

HLIB Research pointed out that latex prices were expected to rise due to wintering season, whereas higher butadiene prices would drive nitrile rubber prices higher.

“Nitrile gloves are currently priced at around US$18 (RM81) per thousand pieces, and Top Glove aims to raise about US$1 (RM4.52) in each revision, with more aggressive revision of about US$3 (RM13) expected from April,” the brokerage said.

“Other Malaysian, Chinese and Thai glove manufacturers will likely follow suit, since rising raw material prices will impact all producers. While we anticipate the price adjustment to alleviate some of the margin pressure, we are not optimistic that this will bring Top Glove back to profitability,” it argued.

HLIB Research maintained its “sell” recommendation on Top Glove, with an unchanged target price of 53 sen based on a price-to-book multiple of 0.8 times for financial year ending Aug 31, 2023.

The brokerage said it would take time for the market to absorb the excess glove supply before Top Glove could regain profitability.

Top Glove has yet to see any major uptick in terms of glove demand, except for the one-off order supplying to the British government in December 2022.