Last Friday, the glove maker posted a net loss of RM926.64 million for its financial year ended Aug 31 (FY2023) from a net profit of RM225.56 million (FY2022) previously. The huge loss was due partly to asset impairment and write-off of RM389 million.
It also suffered its fifth consecutive quarterly net loss in its fourth quarter (Q4 FY2023) with a wider net loss of RM463.14 million versus RM62.99 million in Q4 FY2022.
Maybank Investment Bank (Maybank IB) said Top Glove is likely to continue registering losses in FY2024 and FY2025 before turning around in FY2026.
This is after factoring in the group’s FY2023 results, lower plant utilisation rate for FY2024/FY2025, and the exchange rate of RM4.50 to the US dollar from RM4.20.
“We raise our FY2024-FY2025 loss projections and introduce FY2026 forecasts, expecting a turnaround in FY2026,” said Maybank IB.
It lowered its 12-month target price (TP) by three sen to 77 sen and upgraded its recommendation to “hold” from “sell” previously, noting the “risk-reward has become more balanced post-kitchen sinking exercises”.
Meanwhile, Public Investment Bank (PIVB) said it remains cautious on Top Glove’s operating landscape, mainly due to the formidable competitive presence of Chinese players.
Based on its channel checks, Chinese players are currently selling at US$14-US$15 (RM 66.13- RM70.85) per 1,000 pieces, with improved margins due to lower coal prices.
“Malaysian glove players could face further erosion in global market share as customers may continue to divert their orders to Chinese players, lured by the comparatively lower pricing.
“As such, we expect Top Glove to remain loss-making and is unlikely to revert back to its pre-Covid profit levels anytime soon,” PIVB said.
PIVB retained its “underperform” call on Top Glove with an unchanged TP of 63 sen amid a widening quarterly net loss due to a decline in average selling prices (ASPs) and weaker sales volume.
Hong Leong Investment Bank (HLIB) also maintained its “sell” call with an unchanged TP of 51 sen as it is not anticipating the company to return to the black in the near term.
“In light of escalating nitrile butadiene costs, due to the increase in feedstock prices, the company’s management anticipates a corresponding upward adjustment in ASPs,” it said.
HLIB said sales volumes have been showing positive month-on-month growth, and the pricing gap between local and foreign players has narrowed.
“However, we hold the perspective that further ASP increases might potentially hinder the recovery momentum, as buyers seek out the most cost-efficient supplier.
Top Glove’s shares price ended half-a-sen or 0.7% higher at 76 sen, giving the group a market capitalisation of RM6.2 billion.