Top Glove's core net loss likely smaller in 4Q on higher sales
Top Glove Corporation Bhd, the world's largest glovemaker by volume, will likely report a smaller net loss in its final quarter thanks to higher sales, said RHB Investment Bank.
Core loss will likely come in between RM2 million and RM5 million for the quarter ended Aug 2024 (4QFY2024) versus RM53.5 million in the 3QFY2024 as sales grew 20%, RHB said in an earnings preview. That would bring FY2024's net loss to RM175 million, sharply below FY2023's RM517 million.
Weaker US dollar may have also weighed on 4QFY2024 results, RHB flagged. While the softer greenback may erode near-term margin, "we believe the impact could be mitigated" with higher average selling prices, which "should sustain our base case long-term margin outlook," it said.
Top Glove Corp is scheduled to report its results on Oct 10.
Shares of Top Glove retreated from this year's high in May but remained 14% higher than at the end of 2023, thanks to planned US tariffs on Chinese competitor'’ products and earlier news about the mpox emergency.
The US dollar meanwhile has declined nearly 11% to a three-year low against the ringgit before rebounding sharply last week. Year to date, the ringgit is still up nearly 5% against the greenback.
"Industry operating dynamics remain in favour of local gloves manufacturers as customers are more receptive to the price hike," RHB said. The industry's blended average selling price may improve further by Dec, the house said, citing discussion to raise prices on weakening US dollar.
For FY2025, core loss is expected to narrow further to just RM5 million before turning in a profit of RM52 million in FY2026, according to RHB’s forecasts.
RHB is among the eight out of 21 research houses with 'buy' calls on the stock while another eight has the stock on 'sell' and remaining five are on 'hold' rating. The consensus 12-month target price is RM1.12, according to Bloomberg, indicating potential return of 8.7%.
"Our buy call is premised on improving investor sentiment due to favourable operating dynamics," Top Glove said. Top Glove, being a high-beta stock, is "poised for a meaningful share price recovery," the house added.
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