Top Glove (SGX:BVA) reported 2QFY26 core net profit of RM27.4m (1QFY26: RM32.8m) and higher revenue of RM1.05b (+23% q-o-q), below expectations.
For 1HFY26, the core net profit of RM60m was below expectations, making up 31% and 36% of our and consensus full-year forecasts.
Operating parameters were mixed in 2QFY26.
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Input costs were also lower as key raw material costs declined (nitrile butadiene -3% q-o-q; latex concentrate cost -1% q-o-q). These offset the ASP contraction (-2% q-o-q) to around US$17/’000 pcs due to intensifying competition from China competitors, in addition to softening MYR/US$ rates (-5.9% q-o-q).
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Rising input cost pressures on Middle East tensions, but well offset by sharp ASP hike.
Following Israel and US’ strikes on Iran last week, gas and chemical prices have spiked. We assess that Top Glove’s key raw material costs natural latex and acrylonitrile have seen price increases of 5-10% and 90- 100% respectively.
Nevertheless, management guided a US$7 ASP hike for April’s shipment of nitrile gloves to about US$24/ ‘000 pieces, which will be sufficient to offset the increase of raw material prices. As such, we estimate that Top Glove’s profitability per glove and EBITDA margin will be well maintained throughout FY26.
Volume sales to sustain at high levels in 2HFY26, allowing 30-40% y-o-y growth and exceeding pre-COVID-19 levels.
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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/.
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