PETALING JAYA: Top Glove Corp Bhd
’s earnings is seen to normalise from exceptionally strong recent levels in financial year 2027 (FY27).
But profitability is expected to remain “structurally healthier” than during FY22 to FY24, according to CGS International (CGSI) Research.
The research house said the global glove industry is transitioning from recovery to normalisation, supported by improving supply-demand conditions and more rational pricing behaviour.
“Management believes the global glove industry would transition from recovery to normalisation during its FY27 forecast, supported by improving market balance and more rational pricing behaviour,” it said.
CGSI Research said Top Glove’s gross profit spread is expected to normalise towards US$3.50 per thousand pieces in FY27, compared with an unusually strong US$6 in the fourth quarter of FY26.
“Top Glove’s glove ASPs stood at about US$22 per thousand pieces at end-October 2026, up US$3 since September 2026.
“It now conducts pricing discussions weekly rather than monthly, reflecting customers’ increased sensitivity to volatile coal and natural gas costs following the Iran war,” it said.
Following a visit to Top Glove’s research and development centre in Klang, CGSI Research said the company’s manufacturing competitiveness remains underappreciated.
“Management highlighted that contrary to common perception, Malaysia remains broadly competitive with China on labour costs (Top Glove: 1.6 workers per million pieces versus key China rival companies: 1.5 workers per million pieces), helping to alleviate concerns surrounding future wage increases,” CGSI Research said.
It noted Top Glove has around 23 billion pieces of dormant annual production capacity that could be reactivated with relatively modest upgrades.
“Management also believes dormant industry production capacity is less likely to return than commonly assumed due to the significant costs and operational hurdles involved in restarting idled plants, while Top Glove’s own inactive capacity can be reactivated with relatively modest upgrades,” it said.
However, foreign-worker constraints in Malaysia could prompt Top Glove to direct future investments towards Thailand, where it currently operates two factories with eight billion pieces of annual capacity.
The group is targeting another six billion pieces of annual production capacity by end-FY27.
“Management indicated that Malaysia’s foreign worker constraints are increasingly tilting its future investments toward Thailand where it currently has two factories, with a total production capacity of eight billion pieces per year,” it said.
CGSI Research expects Top Glove’s normalised net profit to rise from RM377.3mil in FY26 to RM525.3mil in FY27, before increasing to RM549.4mil in FY28.
“We remain constructive on the sector given limited evidence of aggressive production capacity expansion among major producers,” it said.
CGSI Research also noted Top Glove’s labour intensity had improved significantly from four employees per million gloves produced in 2016 to 1.6 in 2026, reflecting continued efficiency gains.
Meanwhile, the research house said cleanroom gloves, despite commanding average selling prices of around US$50 per thousand pieces, account for only about 5% of the group’s sales volume and are unlikely to become a major earnings driver.
It added Top Glove is working to align its environmental, social and governance disclosures with industry peers Hartalega Holdings Bhd and Kossan Rubber Industries Bhd to facilitate its re-entry into the FTSE4Good Bursa Malaysia Index.
CGSI Research reiterated its “add” recommendation on the counter with an unchanged target price of RM1.14.
“We like Top Glove for its lean cost structure and broad product offering, which provide resilience and flexibility amid a volatile global operating environment.”
It identified intensified competition from China and higher labour costs as key downside risks.
Furthermore, an analyst said slower capacity growth by Chinese manufacturers in Asean, coupled with ongoing labour shortages in Malaysia, should help prevent a significant increase in industry supply.
“This could create a more favourable supply-demand balance and lend further support to Malaysian glove makers’ margins,” he added.
