Rubber Products - RHB Invest 2024-01-05: Transition Towards Sustainable Growth; Upgrade

Rubber Products - Transition Towards Sustainable Growth; Upgrade

Top Glove (SGX:BVA) | SGinvestors.ioTop Glove (SGX:BVA)
  • Upgrade rubber glove makers to OVERWEIGHT from Neutral. Recent export data suggests a positive demand recovery sign that coincides with steady ASP performance. Further normalisation in gas tariffs and various cost discipline measures in place could eventually propel profitability in 2024.
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What triggered the upgrade?

  • Malaysia’s monthly glove exports remain on a positive y-o-y growth trend for two consecutive months following a 2% y-o-y increase in Nov 2023 (Oct 2023: +33%).
  • Despite export volumes contracting by 25% on a m-o-m basis, export value was 1% m-o-m higher in Nov 2023. We believe this may indicate cost pass-throughs starting to kick-in and a better product mix in November. On this front, we believe the ability to initiate cost pass-throughs will serve as a crucial catalyst to drive profitability moving forward, more so as it also indicates the risk from a price war has gradually dissipated.
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  • While domestic glovemakers suffered a weaker ASP in 3Q23, (down 3-7% q-o-q), we think the pick-up in export value could substantiate the management teams’ guidance and our expectations of a stabilised ASP trend, which could gradually materialise in 2024.

Demand-supply dynamic.

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Oong Chun Sung RHB Securities Research | 2024-01-05

More views on outlook of manufacturing / technology sector:
Analyst Reports on Singapore Manufacturing & Technology Sector

Read also RHB's most recent report:
2024-06-18 Top Glove - Operating Dynamics Turned Favourable; Upgrade To BUY.

Previous report by RHB:
2024-04-02 Top Glove - More Time Required For Turnaround.

Price targets by other brokers at Top Glove Target Prices.

Listing of research reports at Top Glove Analyst Reports.

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