PETALING JAYA: The domestic glove industry is expected to see stabilising demand as global orders gradually return to normal after several years of inventory destocking.
Manufacturers are reporting improving order flows, particularly from US customers, and lead times for certain players have doubled from 30 days to 60 days, signalling firmer near-term demand visibility, according to BIMB Research.
“We believe industry demand is gradually normalising following several years of inventory destocking,” the brokerage said, while highlighting Malaysia’s continued tariff advantage over Chinese glove producers as a supportive factor.
BIMB Research cautions, however, that rising global oil prices could increase production costs, given that fuel and energy account for roughly 15%-20% of total manufacturing expenses.
“Based on our channel checks, companies may attempt gradual average-selling-price (ASP) adjustments (from around US$17 to US$18 per 1,000 pieces now) to mitigate the impact of higher input costs if demand continues to stabilise,” it said.
While a meaningful ASP recovery has yet to materialise, the combination of stabilising demand and a strengthening US dollar could allow for modest price increases in the near term. Despite the improving backdrop, BIMB Research maintains a “neutral” stance on the overall sector, saying clear re-rating catalysts remain absent.
“However, the recent share price correction has improved the risk-reward profile, with valuations now close to historical trough levels despite gradual earnings recovery,” the brokerage explained.
The research house has upgraded specific calls, recommending a “trading buy” for Hartalega Holdings Bhd
, with a target of 96 sen; Top Glove Corp Bhd at 72 sen; and Kossan Rubber Industries Bhd at RM1.19, while Supermax Corp Bhd remains “non-rated”.
BIMB Research said that near-term downside risks are limited and that tactical trading opportunities could emerge as earnings stabilise and demand improves.
The recently concluded earnings season confirmed gradual operational stabilisation across the sector. On average, companies recorded flat quarter-on-quarter revenue growth, as flattish ASP and a stronger ringgit offset the positive impact from improving order flows and normalising inventory levels.
One analyst noted that while demand is improving, the outlook for the glove sector remains lacklustre due to rising cost pressures. “Cost pressures from rising oil and energy prices are real. While manufacturers can pass on modest price increases, we see the outlook of the sector as still challenging.”
