In a sector update today, the research house has maintained a “neutral” call on the sector, which it said will benefit from a relief in cost pressures and savings from the decommissioning of older plants for the second half of 2023.

Kenanga said for the time being any further decommissioning of older production facilities by local players could take more supply pressures off the sector.

It also projects that industry capacity cutbacks ought to bring back more rational competition and hopefully stop the bleeding of the industry players.

In general, the research house has given a “market perform” rating on Hartalega Holdings Bhd with a target price (TP) of RM1.85, Top Glove Corp Bhd (75 sen), Kossan Rubber Industries Bhd (RM1.28) and Supermax Corp Bhd (85 sen).

Additionally, Kenanga explained that the sector’s operating environment will remain challenging in the subsequent quarters with excessive oversupply.

Having said this, Kenanga anticipates the oversupply condition to be less profound and gradually improve following signs of players discarding production capacity via the decommissioning of selective plants.

Kenanga said the demand-supply situation will be back to equality in 2025.

“This will happen when there is virtually no more new capacity coming on stream although the global demand for gloves continues to rise by 15% per annum underpinned by rising hygiene awareness,” it concluded.