CIMB Research expects robust demand for the company’s US-made nitrile gloves.
PETALING JAYA: The US Centres for Medicare and Medicaid Services’ (CMS) proposal to include US-produced domestic nitrile gloves under its payment adjustment scheme from Jan 1, 2026, a decision that is expected to boost demand for US-made nitrile gloves, will benefit Supermax Corp Bhd
.
The glovemaker, which recently commissioned its US plant, is said by CIMB Research to gain from the CMS’ proposed modification to include nitrile gloves under its payment adjustment scheme under its Medicare and Medicaid programmes in which buyers would be compensated for the additional costs of purchasing domestically manufactured gloves.
CIMB Research, which has upgraded Supermax’s stock to a “buy” call from “hold” with a target price of RM1.15 from 86 sen, expects robust demand for the company’s US-made nitrile gloves that sells at higher average selling prices (ASPs) while at the same time passing on the additional manufacturing cost of producing in the higher-cost US.
According to the CMS, the current ASP differential or purchase cost between US domestically manufactured gloves and imported ones stands at 13 US cents per piece (US$13 per 1,000 pieces), which the research house estimates as being a 35% to 38% premium to the ASPs of nitrile gloves produced by Malaysian glovemakers of US$20 to US$21 per 1,000 pieces.
“We expect Supermax to post stronger quarters ahead, especially from third quarter ending Mar 30, 2025 (3Q25) onwards. We understand that the company expects all orders that were earlier contracted at lower ASPs earlier to be fully shipped by end-2Q25.
“Thus, we expect the company to begin shipping more orders at higher ASPs, especially to the United States market, with the implementation of higher US tariffs on China-imported gloves from Jan 1, 2025 onwards (rising to 50% from 7.5% currently).
In addition, the company should benefit from the recent weakening of the ringgit against the US dollar (by 6% to 7% quarter-to-date) as well as higher operating leverage,” it added.
The company expects commercial production of gloves at its US manufacturing facility, one of only three producing nitrile gloves in the country, to begin in January 2025.
These three manufacturers meet only 0.05% of US nitrile glove demand. Supermax’s US facility will have total installed capacity of 19.2 billion pieces per annum when in full operation by 2Q26.
Noting the timely commissioning of the plant, CIMB Research said CMS’ move aligns with the United States government’s push to catalyse more domestic manufacturing of personal protective equipment (PPE) items such as nitrile gloves, considered a critical PPE item, versus the over 95% reliance on imports for nitrile gloves.
