PETALING JAYA: Top Glove Corp Bhd
is expected to face a volatile near-term outlook as rising raw material costs, currency fluctuations and geopolitical tensions cloud earnings visibility, even as demand gradually recovers.
Analysts broadly see margin pressure persisting into the coming quarters, although pricing adjustments and operational flexibility may cushion the downside.
Against this backdrop, research houses remain divided on the stock’s prospects, reflecting an uneven recovery trajectory for the global glove sector.
CIMB Research said it has adjusted its projections following the company’s latest results higher for the financial year ending Aug 31, 2026 (FY26) by 4%, FY27 up by 2% and FY28 by 1%.
This is after incorporating higher raw material prices, a higher average selling price (ASP) assumption of US$20 per 1,000 pieces for FY26 to FY28 (up from US$18 per 1,000 pieces previously), and a weaker US dollar-to-ringgit exchange rate of 3.85 for FY26 to FY28, compared with 4.10 previously.
Despite the upward revisions, it lowered its target price to 63 sen and maintained a “hold” call on Top Glove.
“Top Glove’s longer-term prospects are bleak owing to the elevated operating cost environment, persistent industry oversupply, and competition from Chinese manufacturers,” CIMB Research explained.
The brokerage added that near-term earnings could soften sequentially due to the absence of one-off orders and a lag effect from higher input costs.
“We gather that Top Glove has begun issuing price increase notices to customers to mitigate escalating input costs due to the Middle East geopolitical tensions and to pass on the effect of the weaker US dollar-to-ringgit rate,” it said.
However, it cautioned that earnings may weaken before the benefits of higher selling prices are fully realised.
TA Research also struck a cautious tone, trimming its FY26 net profit forecast and reiterating a “sell” call with a target price of 55 sen.
“We tweak our FY26 net profit slightly lower to RM156.7mil (from RM166.3mil) in view of the potential supply disruptions and increase in NBR or nitrile butadiene rubber latex price,” it said.
The brokerage noted that Top Glove’s management expects volumes to increase by approximately 5% quarter-on-quarter (q-o-q), supported by continued inventory restocking by key customers, although disruptions in the Middle East may temporarily weigh on shipments.
TA Research highlighted sharp cost inflation, stating that NBR latex prices have nearly doubled to US$1.50 per kg, prompting the group to raise ASPs significantly.
It warned that such hikes could shift demand patterns, as “price-sensitive customers opting for latex gloves” becomes more likely.
Hong Leong Investment Bank (HLIB) Research adopted a similarly guarded stance, maintaining a “hold” rating with a lower target price of 54 sen.
It expects muted performance in the third quarter ending May 31, 2026 (3Q26), saying Top Glove could register a flattish q-o-q sales volume, amid uncertainties stemming from the Iran war.
It added that distributors may delay purchases, while logistics disruptions could further dampen demand.
On pricing, the firm noted a more aggressive strategy but remained cautious about margin recovery.
“We conservatively assume the ASP (in greenback terms) increase may not able to fully offset the recent appreciation of the ringgit and higher NBR costs,” it said, adding that rising global supply could intensify competition.
Following earnings revisions, it concluded that the near-term challenges appear largely priced in, leaving a balanced risk-reward.
In contrast, MBSB Research was more constructive, maintaining a “buy” call with a target price of 78 sen.
“Top Glove’s immediate concern is for its operations centres to navigate between surging market demand and geopolitical volatility, primarily by leveraging its unique production flexibility to offset a possible 23% to 44% spike in NBR costs,” it said.
MBSB Research firm believes the company’s ability to switch between nitrile and natural rubber gloves, alongside high utilisation rates, will help sustain margins.
It added that this operational agility, combined with a dynamic pricing strategy to pass through rising costs via higher ASPs, has allowed Top Glove to restore margins to pre-pandemic levels, while maintaining its positive long-term outlook.
Kenanga Research also remained optimistic, reiterating an “outperform” call with a target price of 75 sen despite cutting FY26 earnings forecasts by 12% to better reflect the group’s guidance of higher NBR prices and the assumption that cost is not fully passed through.
Still, it highlighted strong demand prospects, noting that the company is guiding for a volume sales growth of 25% to 35% year-on-year (y-o-y) in FY26.
Kenanga Reserach pointed out the significant impact of cost inflation, explaining that since raw material accounts for 40% of total cost, a 50% increase in input nitrile will reduce bottom line by 20% assuming no cost pass through.
It expects gradual price increases and capacity expansion to support growth, although substitution to latex gloves may occur if nitrile prices rise sharply.
Phillip Capital Research took a neutral stance, maintaining a “hold” rating with a target price of 54 sen.
It said geopolitical risks are manageable, noting that “ongoing geopolitical tensions in the Middle East are expected to have minimal impact on US-bound shipments, given the availability of alternative shipping routes.”
While it lowered revenue forecasts on softer selling prices, it kept earnings largely unchanged due to better margins.
For context, Top Glove recently reported a net profit of RM30.76mil for 2Q26, up 1.5% y-o-y, while revenue rose 14% to RM1.01bil.
For the first half, net profit surged nearly 94% to RM69.34mil, supported by steady demand recovery and improved operational efficiency.
Meanwhile, one analyst told StarBiz that Top Glove’s capacity expansion is encouraging, but with ongoing geopolitical risks and competitive pressure from China manufacturers, earnings growth might remain moderate despite steady demand recovery.
“While Top Glove has shown resilience in navigating raw material spikes, we remain cautious on margins in the next two quarters, as cost pass-through may lag behind rising NBR prices and currency fluctuations,” he added.
