Top Glove's 1QFY25 core net loss of MYR5.8m was in line says Maybank IB, after the glove maker released its latest earnings report. The house noted that the first quarter plant utilisation rate (UR) improved to 66% (from 60% in 4QFY24), but blended ASP declined by -2% QoQ.

Maybank said Top Glove said it is confident of a turnaround in FY25E on better sales volume and ASP, the house however is maintaining its FY25-27E earnings forecast and MYR1.08 TP on 1.8x CY26E P/B. It also reiterates a SELL noting that the positives have been more than priced in.

1QFY25: lower core net loss
Excluding MYR11.3m in non-operational net positives (such as fair value gain, unrealized forex gain, and PPE write-off), TOPG's 1QFY25 core net loss was MYR5.8m, versus our and consensus FY25E net profit forecasts of MYR124m and MYR139m, respectively. 1QFY25 core net loss was due to realised forex losses and the partial recognition of higher ASPs during the
preceding quarter (Sep-Nov 2024). However, we expect stronger earnings ahead on higher plant UR and ASPs from increased US orders.

Key highlights from 1QFY25 results concall
1QFY25 sales volume rose 16% QoQ, while ASP declined 2% QoQ to ~USD19.3/k pcs. TOPG expects ASP to rise to USD21-22/k pcs from Mar 2025 (vs. our FY25E ASP assumption of USD22/k pcs) as pre-higher US tariff stocks deplete. Management projects sales to grow as orders from US shift to Malaysia due to higher tariffs on China-made gloves from Jan 2025.
TOPG plans to increase capacity to 70b pcs p.a. (from 64b presently) by reopening idle plants, with current UR at 70%. It also aims to expand into Vietnam, producing both natural rubber and nitrile gloves.

Uncertainty remains on demand from non-US markets
Maybank IB has maintained its earnings forecasts but remains concerned on the glove maker's exposure to the non-US markets, which accounted for 82% of its 1QFY25 sales volume (-2 ppt QoQ, compared to pre-pandemic level of 76%). The research house also expects Top Glove's Chinese counterparts to divert their US sales to these markets starting Jan 2025.

The house believes for TOPG, regaining previous US customers or securing new ones may take up to six months due to the customers' audit process. Elsewhere, TOPG's proposed 1-for-20 bonus issue of up to 406m warrants (exercise price: MYR1.27/sh) is slated to be listed by Feb 2025