PETALING JAYA: Top Glove Corp Bhd
’s business outlook has improved, supported by a recovery in average selling prices (ASP) and a tightening supply chain that could accelerate industry consolidation.
Hong Leong Investment Bank (HLIB) Research stated that the glove maker said ASPs for generic medical nitrile gloves rose in late March after four consecutive quarters of decline.
This recovery is primarily a response to skyrocketing costs for raw materials, specifically nitrile butadiene rubber (NBR).
Input costs for butadiene and acrylonitrile have surged by 83.1% and 51.4%, respectively, due to the Iran war.
Top Glove’s management told HLIB Research that it has initiated weekly price hikes to pass these costs through to customers, a move mirrored by rival Chinese producers like Intco Medical.
“Management noted the largest Chinese player, Intco Medical, has implemented similar ASP increases in April to reflect higher NBR costs and is also requiring cash deposits on orders, a measure not yet adopted by Top Glove,” it noted in a report.
According to Top Glove, although sales volume dipped in March as buyers adopted a “wait-and-see” approach, purchasing activity had begun normalising in April with buyers accepting the new pricing, HLIB Research stated.
Tight NBR supply and stricter supplier terms, meanwhile, have become a catalyst for much-needed industry consolidation.
NBR suppliers are now requiring cash deposits of up to 100%, a sharp increase from the previous 20% to 30%.
However, despite the ASP hike, Top Glove’s management remains conservative and expects quarter-on-quarter margins to be maintained under a cost pass-through mechanism.
Nevertheless, HLIB Research expects the company’s absolute profits to improve due to a larger revenue base as a result of higher ASPs.
The glove maker also indicated sales volume declined month-on-month in March as buyers held back purchases due to ASP increases, but purchasing activity had begun to normalise in April.
According to the report, Top Glove’s management said if nitrile glove ASP reaches US$30 per 1,000 pieces, there could be some substitution toward latex gloves.
In this scenario, it is well positioned to benefit relative to peers, given its stronger latex glove production capabilities.
HLIB Research has raised its target price for the stock to 75 sen a share (from 54 sen) but maintained a “hold” rating, pending further evidence of sustained rationalisation in the sector.
It raised Top Glove’s FY26 earnings forecast by 42.8% on higher ASPs to a core net profit of RM231.1mil in FY26 ending Aug 31.
