Net profit for the first nine months of its financial year was only about a third of the consensus’s full-year forecast, prompting cuts to price targets and estimates.
Its Q3 net profit fell 31% to RM34.74 million from RM50.67 million a year earlier as a surge in expenses nearly wiped out its revenue growth. The quarterly profit was also inflated by gains on disposal of property, plant and equipment totalling RM29.72 million.
Revenue for the quarter was up 30% to RM830.25 million from RM636.87 million a year ago.
For the nine-month period (M9 FY2025), Top Glove posted a net profit of RM70.5 million versus a net loss of RM58.24 million last year. There was, however, a bright spot as revenue surged 55% to RM2.6 billion from RM1.68 billion in the same period last year.
CLSA downgraded Top Glove to “hold” and slashed its target price (TP) to 70 sen from RM1.05 previously, citing ongoing pricing competition in non-US markets.
The counter ended down one sen or 1.4% at 71 sen today, giving the group a market capitalisation of RM5.83 billion. Year to date, it had slumped 45%.
The downgrade follows Top Glove’s M9 FY2025 core profit of RM39 million, which “fell below expectations” primarily due to lower-than-expected average selling prices (ASP) despite easing input costs and gradual recovery in US volumes.
The research firm noted that earnings recovery would likely be hampered by continued pricing competition, compounded by the upcoming supply of Chinese gloves from Asean countries.
CLSA also cut its FY2025-27 earnings per share estimates by 5%-25%. It believes the group’s earnings turnaround has already been priced in, limiting potential upside from current levels.
‘Big earnings miss’
AmInvestment Bank (AmInvest) maintained its “sell” call and cut its TP to 50 sen from 68 sen previously on Top Glove’s “big earnings miss”.
“While Top Glove delivered an earnings turnaround in M9 FY2025, it still fell short of expectations as US customers adopted a ‘wait and see’ approach due to tariff uncertainties in Q3 FY2025. Amid intensifying competition, US tariffs on Chinese gloves offer limited relief,” it said in a note today.
It also highlighted the dim prospects in Europe despite the European Union’s (EU) recent tender restrictions on China.
“Management indicated that EU’s exclusion of Chinese glovemakers from public tenders above 5 million euros has minimal impact, as the value of gloves tenders is typically lower than the threshold,” it added.
AmInvest noted that volume in Europe, which accounts for 37% of Top Glove’s sales, continued to decline in Q3 as Chinese players redirected their sales from the US market.
Analysts have flagged dumping by Chinese glove makers in non-US markets to weather the Trump tariffs. North America accounts for about 26% of Top Glove’s sales.
Maybank Investment Bank, which kept its “sell” call on the stock, said it remains concerned on intensifying competition, particularly from capacity in China targeting non-US markets, and from China players’ overseas plants focussing on the US market.
Executive chairman Lim Wee Chai, 67, founded Top Glove with his wife Tong Siew Bee in 1991 and within a decade transformed it into one of the world’s largest producers of rubber gloves.
Apart from Malaysia, it also has manufacturing operations in Thailand, and Vietnam, with its 51 factories having a total production capacity of 95 billion gloves annually. It currently exports to 195 countries worldwide.
Lim has a net worth of US$1 billion (RM4.2 billion), placing him at the No 21 spot on Forbes Malaysia’s 50 Richest list.