Galaxy International sings the opposite: Glove stocks are too expensive and should reduce their holdings

(KUALA LUMPUR, 18th) Although the US further raised import tariffs on Chinese gloves, which is generally thought to benefit Malaysian glove exports, Galaxy International Securities believes that after the recent rebound, the valuation of local glove stocks is too high, so it continues to argue against the market and maintain a “reduced holdings” rating.

Galaxy International Securities analysts pointed out that the current market's valuation of Malaysian glove stocks basically reflects enthusiastic expectations for a strong rebound in profits, which does not seem reasonable.

“The return on equity (ROE) of glove stocks continues to be under pressure. Even in 2026, it is still below 10%, far below the 15% to close to 20% level before the outbreak of the pandemic. As a result, the current valuation of glove stocks seems unreasonable.”

According to the analyst, the current stock price-to-book value ratio (P/BV) of glove stocks has risen from 1 times to 1.3 times at the beginning of the year to 1.2 times to 1.7 times, which is closer to 3 to 4 times before the outbreak of the epidemic.

“First, due to scarce domestic and foreign labor, it is difficult for glove vendors to expand production capacity, so short-term sales will still be limited by production.”

Analysts also said that even with less competition from Chinese gloves, gloves exported from Malaysia to the US may not experience significant price increases, because US customers are likely to closely monitor the inflationary impact of this new policy on medical costs, which in turn limits the room for profit growth.

“In any case, Top Glove believes that the Chinese industry plans to circumvent the US tax increase plan by setting up overseas factories, and it should not be realized until 2026, because the relevant businesses need to deal with greater operational challenges before they can expand overseas production.”

The target prices for these glove stocks are 91 cents, RM2.48, RM2.07, and 90 cents, respectively.

After experiencing yesterday's surge, many glove stocks have pulled back one after another today. Among the “Big Four Heavenly Kings”, He Tejia had the strongest performance, falling only 3 cents or 0.96% throughout the day and closing at RM3.11, with a turnover of 34.18 million8,700 shares.

The top-grade gloves and high-yield garment industries both experienced significant declines. Top gloves closed at RM1.07, down 7 cents or 6.14%, with a trading volume of 0.1 billion30.3 million8,700 shares; the high-yield garment industry closed at RM2.12, down 13 cents or 5.78%, with a trading volume of 29.29 million7,000 shares.

Supermart, on the other hand, fell 2.5 cents or 2.69% throughout the day, and closed at 90.5 cents. The trading volume was 23.34 million5,400 shares.