HLIB Research said Top Glove’s management has guided for stronger quarter-on-quarter sales volume.
PETALING JAYA: Top Glove Corp Bhd
’s recovery remains fragile and the glove maker is expected to register sequentially flattish results in the second quarter of its financial year ending Aug 31, 2026 (2Q26) as unfavourable foreign exchange (forex) headwinds will offset favourable operating leverage and lower natural gas prices.
Hong Leong Investment Bank Research (HLIB Research) said the group’s 1Q26 core profit after tax and minority interests (Patmi) of RM39mil came in within its expectations, but above consensus full-year forecasts.
“Notably, our previous FY26 forecast had baked in core Patmi of RM32mil in 1Q26.
“Our 1Q26 core Patmi was arrived at after adding back various exceptional items amounting to RM400,000. This was mainly from forex losses (RM6.2mil), property, plant and equipment write-offs (RM2.6mil), which were partially offset by a reversal of inventory write-downs upon disposal (RM3.5mil), gains on investment securities (RM2.5mil), and forex gains (RM2.2mil),” the research house said in a report yesterday.
On a year-on-year (y-o-y) basis, the group’s revenue was flattish in 1Q26. The improvement in sales volume was mainly supported by gradual demand recovery, trade diversion by US customers to Malaysia, and the group’s competitive pricing strategies.
“The weaker average selling price was mainly dragged by increased competition in the industry, lower raw material prices as well as a weaker US dollar against the ringgit. Despite flattish revenue growth, Top Glove returned to the black at RM39mil versus a loss of RM18.3mil for 1Q25, and was supported by lower raw material prices, favourable operating leverage, and ongoing cost optimisation initiatives,” HLIB Research said.
The research house said Top Glove’s management had guided for stronger quarter-on-quarter (q-o-q) sales volume, mainly underpinned by tender wins in the European market.
For pricing, HLIB Research noted management indicated plans to raise prices by about 2% to 3% monthly starting this month, with the aim of passing on higher raw material prices and recent ringgit strength.
The research house added the cost of natural rubber and nitrile butadiene rubber are expected to edge up moderately, while natural gas tariffs are expected to decline by about 5% q-o-q in 2Q26.
“Overall, we expect Top Glove to register a flattish q-o-q results in 2Q26, where favourable operating leverage and lower natural gas prices will be offset by unfavourable forex headwinds,” HLIB Research said.
HLIB Research reiterated its “hold” call for Top Glove with a target price of 60 sen based on an unchanged price-earnings multiple of 25 times on lower earnings per share of 2.4 sen (from 2.7 sen) for next year.
The research house said that the current share price already discounts near-term challenges, leaving a more balanced risk-reward profile at this point.
CIMB Research , which also maintained its “hold” call on Top Glove with a target price of 70 sen, said oversupply is expected to persist, capping upside to product prices.
The research house said it estimates the commissioning of new glove plants in South-East Asia by Chinese manufacturers could increase total global supply capacity by between 30 billion and 50 billion pieces next year (15% y-o-y).
“This is likely to result in oversupply as global demand is projected to grow 10% y-o-y in 2026, based on our estimates.
“As a result, we see limited headroom for price adjustments next year despite the supportive backdrop of a weaker US dollar against the ringgit, which in typical circumstances would allow glove makers to raise prices via the cost pass-through mechanism,” the research house said.
