Top Glove - UOB Kay Hian 2023-10-09: Living To Fight Another Day

• Top Glove reported a fifth consecutive quarter of core net losses, albeit narrowed. This is after adjusting for a one-off impairment of RM389m related to the decommissioning of its production lines.
• - Read this at SGinvestors.io -
• Positively, some light was shed from margin expansion following moderating input costs and favourable forex, besides leaner opex after recent capacity rationalisation exercises.
• Maintain HOLD on Top Glove with a lower target price of RM0.82.

4QFY23 results within expectations.

• Top Glove (SGX:BVA) reported a narrowing 4QFY23 core net loss of RM74.6m (-30.8% q-o-q, +41.9% y-o-y), despite revenue declining significantly to RM476m (-10.3% q-o-q). This is after stripping off a one-off impairment of RM389m relating to decommissioning of its production lines.
• - Read this at SGinvestors.io -

Operating statistics reflect industry-wide slowdown; ASP and volume sales contracted q-o-q.

• 4QFY23 volume sales softened ~9.5% q-o-q, mainly due to overall softer demand. Meanwhile, ASP contracted marginally to ~US$21 per 1000 pcs (-0.5% q-o-q) in tandem with cost pass-through from lower raw material prices.
• Utilisation rate for the quarter remains sluggish at ~31% based on current effective capacity of ~60b pieces annually.
• Given depressed industry utilisation rates, stiff price competition continues to linger and orders remain smaller due to short delivery times.

Bottom line losses continue to narrow; likely to break even in upcoming quarter.

• Read more at SGinvestors.io.

Jack Goh UOB Kay Hian Research | https://research.uobkayhian.com/ 2023-10-09 SGinvestors.io

---