PETALING JAYA: Glove players are expected to see their third-quarter (3Q26) earnings drop on a quarterly basis due to the normalisation of average selling prices (ASPs) and higher natural gas tariffs.
Should a potential hike occur after November, it will bring ASPs to US$23 per 1,000 pieces – which is above the upper end of CIMB Research’s current blended ASP forecasts of US$21 to US$22 per 1,000 pieces.
“While this could support a modest improvement in 4Q26 earnings, we believe glove manufacturers are unlikely to replicate the peak core earnings achieved in the June 2026 quarter.
“This is because ASPs have normalised significantly from the peak levels of approximately US$28 per 1,000 pieces in June 2026,” CIMB Research stated in a recent report.
Furthermore, the wage hike from June 2027 will negatively impact glove manufacturers’ margins, owing to the labour-intensive nature of the industry and its continued reliance on a sizeable blue-collar workforce.
“Our current forecasts have yet to incorporate the wage hike,” the research house noted.
“Based on our estimates, the increase in the minimum wage could reduce 2027 and 2028 earnings by approximately 4% and 7%, respectively,” the research firm pointed out.
On the gas tariffs, CIMB Research said glovemakers could also face further margin compression as prices hit RM59 per one million British thermal units (MMBtu), in comparison to September’s quarter average of RM49.90/MMBtu.
This factor is impactful because natural gas accounts for 10% to 15% of production costs for making gloves.
With that, CIMB Research said it will maintain a “neutral” rating on the glovemaking sector, taking into consideration the imbalance of demand and supply within the industry, as well as rising cost pressures.
Malaysia’s rubber glove export volume fell 2.5% on a monthly basis to 54,134 tonnes in September 2026, marking a second consecutive monthly decline following the 7.7% monthly contraction in August 2026.
According to the research house, the sector is currently trading at a 0.9 times price-to-book ratio.
“We believe current valuations appear stretched amid potential earnings normalisation in 3Q26,” the research house also said.
It added that Kossan Rubber Industries Bhd
remains a preferred stock.
Its view is supported by its relatively higher exposure to non- generic products and a strong net cash position equivalent to approximately 49% of its market capitalisation.
Meanwhile, on a more positive note, the research firm said competition from China remains benign for now because of concerns of raw materials.
“Based on our channel checks, the ASP gap between Chinese and Malaysian glove products remains narrow compared with the historical differential of US$1 to US$2 per 1,000 pieces prior to the recent feedstock disruptions.”
