The glove manufacturing sector faces a challenging future with persistent overcapacity, weak demand, and high input costs, according to reports by Kenanga Investment Bank (Kenanga). The sector's operating environment in the first quarter of 2024 remained tough, with profitability under pressure from overcapacity, predatory pricing by overseas competitors, and high operational costs despite some recovery in orders.
Kenanga reiterated an UNDERWEIGHT rating on the sector, advising against investment in glove manufacturers due to the tepid profitability and high valuations. The bank highlighted the continued pressure from overcapacity and weak demand, predicting that the challenging conditions will persist through the second half of 2024.
Kenanga reported that overcapacity and predatory pricing have led to a buyers' market, with distributors and buyers seeing no urgency to place sizeable orders or hold substantial stocks. The industry's low utilisation rate of about 45% further exacerbates the situation, making it difficult for manufacturers to raise prices significantly. Additionally, input costs for materials such as nitrile butadiene rubber remain high, and natural gas costs are expected to increase, adding further strain on profitability.
The report also noted some positive developments, such as the decommissioning of older production facilities, which could help ease supply pressure and bring about more rational competition among local players. However, these measures are not expected to significantly improve the overall outlook for the sector in the near term.
Kenanga projected that the glove manufacturing industry will continue to face an oversupply issue throughout 2024, with demand expected to rise by 30% to 390 billion pieces due to restocking, before moderating to an organic growth rate of 15% annually. Despite this, the excess capacity of 212 billion pieces in 2024 indicates that low prices and depressed plant utilisation will continue to be a challenge.
Given the current market conditions, Kenanga has advised investors to avoid all names under their coverage, including Hartalega (HARTA), Kossan (KOSSAN), Top Glove (TOPGLOV), and Supermax (SUPERMX), due to their unsustainable profitability and lofty valuations. The bank has maintained a target price of RM2.33 for HARTA, RM1.48 for KOSSAN, RM0.75 for TOPGLOV, and RM0.83 for SUPERMX, all with an UNDERPERFORM rating.
根据Kenanga Investment Bank (Kenanga)的报告,手套制造业面临着持续产能过剩、需求疲软和投入成本高企的挑战。该行业在2024年第一季度的运营环境仍然艰难,尽管订单有所回升,但盈利能力仍受到产能过剩、海外竞争对手的掠夺性定价以及高昂的运营成本的压力。
Kenanga重申了对该行业的减持评级,建议不要投资手套制造商,因为该行业的盈利能力不高,估值很高。该银行强调了产能过剩和需求疲软带来的持续压力,并预测充满挑战的条件将持续到2024年下半年。
Kenanga报告说,产能过剩和掠夺性定价导致了买方市场,分销商和买家认为下大笔订单或持有大量库存并不紧迫。该行业约45%的低利用率进一步加剧了这种情况,使制造商难以大幅提高价格。此外,丁腈橡胶等材料的投入成本仍然很高,预计天然气成本将增加,这将进一步增加盈利能力。
报告还指出了一些积极的进展,例如旧生产设施的退役,这可能有助于缓解供应压力,并在当地参与者之间带来更合理的竞争。但是,预计这些措施不会在短期内显著改善该行业的整体前景。
Kenanga预计,在整个2024年,手套制造业将继续面临供过于求的问题,由于补货,需求预计将增长30%至3900件,然后放缓至每年15%的有机增长率。尽管如此,2024年2120吨的产能过剩表明,低廉的价格和低迷的工厂利用率将继续是一个挑战。
鉴于当前的市场状况,Kenanga建议投资者避开其所涵盖的所有名字,包括Hartalega(HARTA)、Kossan(KOSSAN)、Top Glove(TOPGLOV)和Supermax(SUPERMX),因为它们的盈利能力不可持续且估值过高。该银行将HARTA的目标价格维持在2.33令吉,KOSSAN的目标价格为1.48令吉,TOPGLOV的目标价为0.75令吉,SUPERMX的目标价格为0.83令吉,均为表现不佳。