The world’s largest natural rubber glove maker remained in the black for the second consecutive quarter following a sharp increase in sales. Prior to that, it had been bleeding red since the financial year ended Aug 31, 2022 (FY2022).
On Thursday it announced a net profit of RM30.28 million for the quarter ended Feb 28, 2025 (Q2 FY2025) from a net loss of RM51.2 million a year ago. Revenue soared 61% year-on-year to RM883.65 million due in part to US tariffs on Chinese gloves.
For the first-half year (H1 FY2025), the group rebounded with a net profit of RM35.76 million while revenue jumped 70.2% to RM1.77 billion from RM1.04 billion in the previous corresponding period.
There was little reaction to the news it achieved a second consecutive quarter of profitability. Its shares dipped 1.7% or 1.5 sen to 88 sen at the close on Friday, valuing the group at RM7.19 billion. In fact, the stock has fallen 32.2% year to date.
Top Glove’s core net profit for its first six months accounted for only about 19% of consensus full-year estimates, prompting cuts to earnings estimates by various research houses.
AmInvestment Bank (AmInvest) maintained its “sell” call with a lower target price (TP) of 68 sen as its current valuation has “moved ahead of fundamentals” despite the recent sharp share price correction.
“While Top Glove delivered an earnings turnaround in Q2 FY2025, it still fell short of expectations due to lofty earnings expectation by the street. We expect the earnings to improve sequentially on the back of rising sales volume despite lower average selling price (ASP) and rising labour cost.
“Chinese manufacturers’ expansion plan outside of China to bypass the (US) tariff will further exacerbate the current glove oversupply situation,” it warned in a note on Friday.
Stiffer competition
AmInvest said the non-US market will experience stiffer competition as Chinese glove manufacturers are flooding the Europe market with very competitive ASP at US$15/carton.
“Management maintains the target sales volume of 43 billion pieces for FY2025. To note, the volume for H1 FY2025 was around 19 billion pieces, which is equivalent to the 45% of its full year target,” it said.
On the cost front, it noted the increase in minimum wage effective February 2025 will increase Top Glove’s cost by RM29 million annually.
Meanwhile, Apex Securities said the glove industry will remain challenging for the next two quarters, as most US customers have completed their frontloading activities before the higher US tariffs kicked in.
Global oversupply could also worsen as China’s manufacturers circumvent US tariffs by increasing production in Southeast Asia, warned the research house, which maintained its “hold” call on the stock.
Meanwhile, RHB Research is bullish on Top Glove’s prospects and has upgraded its call from “sell” to “buy” with a lower TP of RM1.06 from RM1.10 previously.
“We upgrade our call on potentially improving sales volumes by June (Q4 FY2025) as US customers’ inventory levels fully deplete,” it said.
It said the management, in a recent analysts’ briefing, guided that sales volumes hit a trough in February but are likely to resume a positive growth trend in March-May.
Top Glove was founded by its executive chairman Lim Wee Chai, 67, and his wife Tong Siew Bee in 1991. He set up the business to capitalise on surging global demand for rubber gloves driven by the AIDS epidemic.
Within a decade, Lim transformed the company into one of the world’s largest producers of rubber gloves, becoming a billionaire in the process.
His is the classic rags to riches story. He was born and raised in a Chinese new village in Jelebu, Negeri Sembilan. His parents ran a rubber trading business, and he would help out in the rubber estate during weekends.
Lim has a net worth of US$1.1 billion (RM4.86 billion) as of March 21, 2025, according to Forbes. He is ranked No 21 on its Malaysia’s 50 Richest list.