Maybank IB Research said it is more cautious about the sector after meeting two of China’s major glove makers last week.
KUALA LUMPUR: Maybank Investment Bank (Maybank IB) Research has downgraded its call on the gloves sector to a “tactical positive” from a “positive” call as it foresees continued headwinds in the sector.
In a note yesterday, the investment bank said it is more cautious about the sector after meeting two of China’s major glovemakers last week.
“While the short-term outlook (12 months) remains intact with the recovery in glove demand and stabilising average selling price outlook, the longer-term outlook remains uncertain with expanding capacity from the Chinese glovemakers,” it said.
Following a visit to Intco Medical Technology and Bluesail Group’s glove manufacturing factories in Shandong, China, Maybank IB said it was impressed by the glovemakers’ modernised factories, from production lines to packaging and warehousing.
It noted that the factories are now running close to a 100% utilisation rate, and highlighted that Intco and Bluesail are expanding their capacity progressively both locally and in South-East Asia.
“While Intco and Bluesail will raise their capacity gradually, depending on market demand, uncertainties remain regarding their pricing and market strategy, especially when they have relatively lower production costs due to newer production lines and technology and a vertically integrated supply chain.
“Cost efficiency and technology are the key for Malaysia’s glove producers. We maintain our earnings forecasts but lower our target prices by 4% to 23%,” it said, downgrading its call on Top Glove Corp Bhd
to “hold” while maintaining its “buy” calls on Hartalega Holdings Bhd and Kossan Rubber Industries Bhd. — Bernama
