- 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.
- - Read this at SGinvestors.io -
- 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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