Top Glove - Maybank Research 2024-03-21: Remained In The Red; Looking To Breakeven By 4QFY24

• Top Glove (SGX:BVA)’s 2QFY24 core net loss of MYR58m (vs. MYR162m/56m net loss in 2QFY23/1QFY24) came in higher than expected. 2QFY24 plant utilisation rate improved to 40% (from 34% in 1QFY24, on 60b pcs total capacity), while blended ASP declined by 5% q-o-q.
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Hit by higher raw material costs

• Excluding RM7 mil non-operational items (e.g. fair value gain on derivatives), Top Glove’s 2QFY24 core net loss was RM58.2 mil, leading to a cumulative core net loss of RM114.1 mil for 1HFY24 (vs. RM343.2 mil core net loss in 1HFY23); the latter at 102%/259% of MIBG/ consensus FY24 net loss forecasts of RM112 mil/ RM44 mil.
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Key takeaways from results con-call

• Top Glove's 2QFY24 EBITDA up by +38% q-o-q due to higher sales volume and better utilization rate despite higher raw material costs and lower ASP;
• Sales momentum has remained strong since Dec 2023, and Top Glove expects sales to trend up further in the coming quarters. It remains optimistic about returning to profitability by 4QFY24. To break even, the utilization rate has to be ≥60% (50% now) barring any unforeseen circumstances;
• ASP is expected to increase in the coming quarters on higher raw material costs, and price hikes by its overseas counterparts will allow Top Glove to follow suit.

Earnings adjustments

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Wong Wei Sum CFA Maybank Research | https://www.maybank-ke.com.sg/ 2024-03-21 SGinvestors.io

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