PETALING JAYA: A new outbreak of the Nipah virus in India’s West Bengal has the potential to alter sentiment in Malaysia’s glove industry, but the risk of a sector-wide re-rating is likely limited. Market attention may lift share prices in the short term, yet structural pressures facing glove makers are likely to remain the dominant influence on valuations, according to Hong Leong Investment Bank (HLIB) Research.
“Despite Nipah’s high fatality rate and the absence of approved vaccines, we feel that its low transmissibility means that the probability of recent cases morphing into a pandemic is low – and thus, is unlikely to re-rate the glove sector,” the brokerage wrote in its report.
“There is also better awareness and containment measures in the region (India, Thailand, Nepal, and Cambodia),” it added. On balance, HLIB Research maintains a “neutral” stance on the sector.
“Following sustained share price correction since early-2025 for the three glove makers under our coverage - Top Glove Corp Bhd
, Hartalega Holdings Bhd and Kossan Rubber Industries Bhd - we believe this has already priced in the near-term and long-term challenges, leaving a more balanced risk-reward profile at this juncture,” it highlighted.
All three glove makers under our coverage are rated “hold”, with target prices of 60 sen for Top Glove, RM1.10 for Hartalega and RM1.13 for Kossan.
Meanwhile, CIMB Research provided a company-specific outlook for Top Glove after a site visit to the group’s research and development (R&D) centre, and said the firm’s cost initiatives support a “hold” recommendation.
The broker noted that Top Glove’s automation drive has cut labour per line to fewer than four workers from eight to 10 prior to 2024, with back-end tasks such as glove stripping and quality inspection largely automated. It stated that the group’s blended cost per 1,000 pieces has fallen to US$15–16 in the first quarter (1Q) of financial year ending Aug 31, 2026 (FY26) from US$18 a year ago, a move that partly offsets pricing pressure.
However, CIMB Research cautioned that challenges in raising average selling prices (ASPs) persist, as customers may resist price adjustments and can easily switch to other manufacturers. Its channel checks painted an overcapacity-driven market, with Chinese manufacturers’ ASPs largely flattish quarter-on-quarter in 1Q26, hovering at US$15–17 per 1,000 pieces in the non-US markets, and industry ASPs are expected to remain broadly unchanged at US$19–20 per 1,000 pieces in 1Q26.
CIMB Research trimmed earnings forecasts for Top Glove across FY26–28 and lowered its target price to 68 sen from 70 previously, citing intensifying competition, a stronger ringgit and constrained cost-pass-through.
A fund manager noted that overall sentiment towards the glove sector remains unexciting. “Health scares like Nipah can create short-term trading interest in glove counters, but without a sustained demand shock, fundamentals will continue to cap any meaningful upside for the sector,” he explained.
“With global overcapacity still unresolved and pricing power remaining weak, glove makers are more reliant on internal cost efficiencies than external catalysts to support earnings recovery,” he added.
