Local glove stock prices have seen a nice price run-up recently, supported by strong volume as well. For example, Top Glove (TOPGLOV) one of the world's leading glove manufacturers continues to attract investors' attention in Bursa Malaysia this year.
The stock has been traded actively since reporting its latest quarterly result, which is still in the red, as investors seem to believe that the worst might be over and looking ahead for turnaround profitability during the second half of 2023.
To recap, prices of glove stocks plunged from November 2020 high. There are indications that the glove sector has probably reached its lowest point and is now beginning to turn around?"
To recap, prices of glove stocks plunged from November 2020 high. There are indications that the glove sector has probably reached its lowest point and is now beginning to turn around?"
Now, the question is whether this is sentiment or fundamental driven?
Major glove manufacturers, including Top Glove, Hartalega, Kossan and Intco Medical (listed in China) have slowed down their expansion plans to ease supply side pressure in the glove industry.
Top glove in particular has revised its capacity target from 204bn to 110bn pcs, while Intco puts on hold its expansion plan of 90bn pcs, and small to medium-sized manufacturers have either cancelled their capacity expansion plans or permanently exist the industry altogether.
The reduction of production capacity has helped rebalanced the glove supply in the face of decreasing orders globally.
The reduction of production capacity has helped rebalanced the glove supply in the face of decreasing orders globally.
Average Selling Price (ASP)
It was reported that the ASP for gloves from Chinese and Malaysian manufacturers is on an upward trend, despite their previous revisions to address the price war and profitability concerns. This increase in price is intended to offset the rise in raw material costs during the wintering season, as well as the increase in butadiene (raw material for nitrile gloves) prices.
Top Glove, in particular, has indicated that they will be increasing their ASP by 5%-10% by April from their current range of US$21/1k pcs. Other glove manufacturers in Malaysia, China, and Thailand are expected to follow suit, given the impact of rising raw material costs and substantial losses incurred in the preceding quarter.
Maybank IB Research has been in contact with the local glove makers. From their discussions, it seems that although average selling prices (ASP) have gone up, buyers seem to be fishing for lower prices over at China. 💢💢💢
Utilization Rate
The local utilization rate (production) is pretty low (<50%) compared to the estimated 80% utilization rate for Intco, China. Local glove makers will see an improvement in bottom line, if the utilization rate stays at this level. It is however not enough to cover higher natural gas and electricity costs. Hence, the Malaysian glove makers will likely remain in losses. 💔💔💔
Market Share
Malaysia’s glove makers at present have lost some of their dominance in the glove space. China’s global market share is now close to Malaysia, we heard. 👀💣
Market Moves
According to DI bots, it seems that local institutional players are the top buyers of gloves, whereas retail traders are the top sellers. 👥💥
Ultimately, the decision is still in your hands, investors. Stay Ahead, Trade Smart.
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