- We maintain our UNDERWEIGHT stance, as we view the sector’s current valuation appeal (on a P/B basis) as secondary to the looming risk of earnings misses. The sector’s narrative remains dominated by a pricing power deficit, with glove producers caught between a strengthening MYR and intensifying global competition.
- - Read this at SGinvestors.io -
Not quite at equilibrium.
- Our 2026F base case assumes a stabilisation in global rubber glove consumption following the normalisation of inventory levels. We expect demand for gloves to grow by 8% in 2026 to ~400bn pieces (2025F: 370bn, based on Hartalega’s disclosures), followed by a more moderate 6% to ~424bn pieces in 2027, driven by structural improvements in global hygiene awareness and occupational safety standards.
- Under these assumptions, a more balanced demand-supply dynamic could emerge by 2027. However, this outcome is highly contingent on the absence of further capacity expansion announcements, particularly from China-linked producers (which could go up to 80bn pieces pa).
ASPs.
- - Read this at SGinvestors.io -
- While a weakening US$ provides some relief on MYR-denominated input costs, it simultaneously erodes manufacturers' pricing power. In a price-taker environment, buyers are likely to leverage the stronger MYR to resist price pass-throughs, thereby increasing margin compression risks.
Investment Strategy.
- Read more at SGinvestors.io.
