Top Glove - Maybank Research 2022-12-15: Losses Deepen

• Top Glove’s 1QFY23 results – net loss of RM168mil (+2.2x q-o-q; RM186mil net profit in 1QFY22) were below our/consensus estimates.
• Near-term outlook remains challenging due to low utilisation rate of 30% (on effective capacity) no thanks to on-going inventory depletion activities at the customers’ end and stiff competition especially from the China counterparts.
• - Read this at SGinvestors.io -

Hit by low plant utilisation rate

• Including RM11mil inventory write down on unsold goods, Top Glove (SGX:BVA) reported a RM168mil net loss in 1QFY23 versus MIBG/consensus FY23E net profit of RM179mil/184mil.
• - Read this at SGinvestors.io -

Key takeaways from concall with Top Glove's management

• Top Glove is unable to raise its selling price due to the stiff competition amid an oversupply environment. To recap, it had intended to raise its ASP by +5% and to resume its pre-pandemic’s widely-used cost-plus pricing in Sep 2022,
• Top Glove will prioritise cash flow over profitability for now. It has lowered its ASP (to below US$20/kpcs) to secure sales and raise plant utilisation rate,
• ASP is stablising or declining at a slower pace in recent months,
• Top Glove will focus on strengthening/optimising its cost structure and temporarily shut down old/inefficient factories, and
• it does not discount the possibility to distribute its treasury shares as stock dividend.

Top Glove – Earnings adjustments

• Read more at SGinvestors.io.

Wong Wei Sum CFA Maybank Research | https://www.maybank-ke.com.sg/ 2022-12-15 SGinvestors.io

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