Analysts have forecast declines ranging from just over 16% to a high of 41% in the share prices of Top Glove Corporation Bhd, Hartalega Holdings Bhd and Kossan Rubber Industries Bhd.

Hartalega Holdings is expected to have it worst. The research unit of Hong Leong Investment Bank (HLIB) sees a 41.2% drop in its share price — from RM2.01 at its close last Friday to RM1.18 going forward.

However, confidence in Top Glove’s performance seems to be the weakest. Apart from HLIB, the research units of AmInvestment Bank Bhd and Public Investment Bank Bhd also see substantial declines in its share price.

For instance, HLIB expects its share price to drop by 40% and AmInvest sees a 26.4% decline. Public Invest has forecast a 25.4% dip.

Analysts have attributed their gloomy outlook to the intense market competition and an imbalance between demand and supply.

HLIB also does not expect the glove makers to achieve profitability in the near future. It said the supply-demand equilibrium would unlikely be attained either in the second half of 2024 (H2 2024) or even in 2025.

HLIB research analyst Sophie Chua said heightened production costs had led to an uptick in selling price in Q1 2023 from an average of US$17 to US$18 (RM78.64 to RM83.26) to US$21 (RM97.14).

However, she said, buyers are resisting the price increases, leading to lower sales volumes and decreasing utilisation rates.

“Considering the expected reduction in (production) costs, it is unlikely that there will be further increases in the selling price, as buyers will demand cost savings from manufacturers,” she said.

Then there is the competition from China, whose glove manufacturers are selling their products at US$3 (RM13.87) lower than the prices charged by Malaysian producers.

“This could mean that raising the selling price will have a negative impact on sales volume and encourage buyers to opt for the Chinese product instead, Chua added.

AmInvest analyst Chee Kok Siang said that from March 16 to June 16 the market had priced itself based on the basis that the worst is over when Top Glove took the lead by raising the selling price in February.

He said that while moderating natural gas prices as well as lower electricity surcharges and operating expenses could lead to improved earnings, they still can’t support the prevailing high valuations.

Malaysian glove makers, he said, had told customers that the price hike in February was necessary because of increases in the prices of raw materials and natural gas, but now these costs have moderated.

“Customers will use these developments to ask for lower prices,” he added.

Public Invest analyst Thye May Ting said the move by all three glove makers to slash annual installed capacity by decommissioning outdated facilities could help to ease excess capacity in the market.

“We are underweight on the glove sector and maintain our under-perform calls on all three glove stocks under our coverage,” Thye said.

“However, we continue to believe that the industry’s overall utilisation rates will remain below the break even level due to weaker global demand for gloves,” she said.

Moving into H2 2023, PublicInvest is not expecting a meaningful turnaround in profitability, she added.

Thye said losses should persist on the back of pricing pressure from China, muted demand as well as elevated electricity and labour costs.

At the close of trading yesterday, Top Glove’s share price closed at 85 sen, unchanged from last Friday, giving it a market capitalisation of RM6.98 billion.

Hartalega saw its share price rise a sen (0.5%) to RM2.02 from RM2.01 last Friday, for a RM6.92 billion market capitalisation while Kossan inched down a sen (0.76%) to RM 1.31 from RM1.32 previously. That gives it a RM3.35 billion market capitalisation.