- We downgrade Top Glove (SGX:BVA) from Hold to REDUCE as we do not see the group generating sizeable net profit until FY26F. We reduce Top Glove's target price to RM0.70, based on 1.0x CY25F P/BV (at -2.5 standard deviation FY11-19 mean), from 1.3x CY24F P/BV previously (at -2 standard deviation).
Challenges persist
- - Read this at SGinvestors.io -
- profitability, measured by EBITDA per 1,000 pcs, may settle at a new normal given the eroding pricing power, and
- elevated glove inventories following pandemic-led stockpiling is limiting strong upside to volume growth in the near term. This could cap the improvement in industry utilisation rates, in our view.
Recent share price run-up presents a good opportunity to take profit.
- - Read this at SGinvestors.io -
- We expect Top Glove to record a core net loss of RM202m for FY24F before eking out a small net profit of RM8m in FY25F. We also introduce our estimates for FY26F, where we project its net profit to grow to RM205m.
Sizeable excess capacity that it needs to cut
- Read more at SGinvestors.io.
