For 1H26, we assess that sector’s volume sales may see a 5-10% q-o-q growth, lifted by normalised US replenishment cycle. Nevertheless, this may be largely offset by a weakening MYR/US$ rate (4.05-4.10) which resulted in top-line compression.
More importantly, the sector’s profitability and margin will also continue to be suppressed by intense competition in the European market, alongside additional capacity from China’s worsening oversupply dynamics.
Finding ground from China’s red ocean strategy; industry oversupply remains challenging.
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Furthermore, some China players are exploring capacity expansion in other ASEAN countries such as Indonesia, Vietnam and Thailand, adding pressure to current oversupply dynamics.
Mixed operating matrixes in 1H26.
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Despite anticipating better utilisation rate assumptions for 1H26, top-line numbers are likely to be compressed due to the weakening MYR/US$ rate. This partially offsets the industry’s margins improvement in 1H26 on the back of better cost efficiency and overall demand recovery particularly from US customers. Core profit margins are expected to chart a sequential recovery at 6-7% in 2025 (2022: 4.8%, 2019: 10.6%).
Malaysian glovemakers’ earnings.
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Above is an excerpt from a report by UOB Kay Hian Research. Clients of UOB Kay Hian may be the first to access the full PDF report @ https://www.utrade.com.sg/.
