AMINVESTMENT Bank expects Top Glove Corp Bhd’s sales volume to improve in the first quarter of financial year 2022 (Q1 2022) as the company has been allowed to resume exporting its gloves to the United States effective September 10, 2021.

The US is the largest consumer of rubber gloves in the world, accounting for about 35% of global demand. 

In a research note today, the investment bank believes that Top Glove’s current average selling price (ASP) downtrend should continue in Q1 2022 but would stabilise in the following quarter. 

Top Glove’s earnings in Q4 2021, which ended August 31, 2021, dropped by 70% quarter-on-quarter (q-o-q) to RM608 million due to lower ASP and volume, while higher supply from China and Thailand also took a toll on the ASP.

“As for volume, the decline was the result of the US export ban on its gloves in the respective quarter,” said AmInvestment Bank.

Meanwhile, CGS-CIMB Research expects Top Glove to continue posting weaker q-o-q results, due to weaker ASPs from incoming new global glove suppliers and slower customer buying patterns.

According to Top Glove, its September 2021 ASP per 1,000 pieces fell to US$40-US$45 (US$1=RM4.18) for nitrile compared to US$58 in Q4 2021, and US$35-40 for natural latex (from US$42 in Q4 2021).

It expects ASPs to continue to decline by 8.0-10% monthly until January 2022.

“Despite weaker earnings prospects, we opine that Top Glove’s current valuations will be supported by inelastic global glove demand, its position as the largest global glove maker, and its strong fundamentals with total cash and investment securities of RM2 billion at end-Q4 2021,” said CGS-CIMB Research.

As at 11.35am, Top Glove shares shed 14 sen to RM2.92, with 20.78 million shares traded. – Bernama, September 20, 2021.