PETALING JAYA: The local rubber glove sector is poised for an earnings recovery due to slower expansion by Chinese peers, while Malaysian producers move closer toward market equilibrium and margin expansion, says CGS International (CGSI) Research.
In a note to clients, the research house raised the sector’s earnings forecast by 3% to 5% for 2026-2028 to better reflect additional upside from margin expansion.
“We believe the global glove market is on track to reach a healthy equilibrium by early-2029,” added CGSI Research.
Based on the industry’s financial year 2025 (FY25) annual reports, the research house estimated that Chinese peers’ nitrile capacity expansion in South-East Asia was lower than previously expected.
It noted the slower Chinese overseas expansion (actual 10 billion pieces in 2025 versus CGSI Research’s estimate of 17 billion pieces), coupled with global factory shutdowns (about 11 billion pieces), is accelerating the resolution of industry oversupply.
Furthermore, Chinese peers’ sales volumes which were up 1.8% year-on-year (y-o-y) and earnings before income tax (Ebit) margins, which are 39% lower y-o-y indicate that Malaysian producers have clawed back global market share.
According to CGSI Research, Ebit per 1,000 pieces for Malaysian glove producers will continue rising, from US$1 in 2025 to about US$2.6 by 2028, while averaging US$1.30 over the past four quarters, as the industry moves closer to market equilibrium and margins expand.
It has upgraded the rubber glove sector to a “neutral” call from “underweight,” as the valuations now appear to fairly discount the earnings recovery. Top Glove Corp Bhd
remains its preferred sector pick, trading at a slight discount to peers at 11.7 times 2028 price-to-earnings.
