In a research note, the investment bank said Top Glove guided that the impact of the recent Red Sea crisis would be minimal as it expects a 15%-20% quarter-on-quarter sales volume growth in the second quarter of 2024 (Q2 2024), which is consistent with the bank’s forecast.

It noted that this differs from Hartalega Holdings Bhd’s recent underperformance results, owing to Red Sea-related shipment delays.

“We attribute the deviation to Top Glove’s first quarter of 2024 (Q1 2024) revenue exposure to less impacted regions such as Asia (32%), Latin America (12%) and Eastern Europe (12%),” it said.

The bank said, following a recent pick-up in demand, Top Glove is gradually ramping up manpower and capacities that were previously idle.

“We gathered that the process could take three months, during which foreign labour will be recruited and production lines, primarily cleaning procedures will be initiated,” it said.

It said that despite input material price reductions since December 2023, the average selling price (ASP) for nitrile gloves remains unchanged to facilitate margin expansion.

“We view this pricing strategy to be more aggressive than some cost-competitive local peers, as they lowered ASP in the fourth quarter of 2023 (Q4 2023) by passing through the lower costs,” it said.

At the close of trading, Top Glove’s share price was unchanged at 90 sen, giving it a market capitalisation of RM7.35 billion.