$TOPGLOV (7113.MY)$ 's 1QFY25 core net loss of MYR5.8m (vs. MYR61m/MYR26m net loss in 1QFY24/4QFY24) was in line says Maybank IB. 1QFY25 plant utilisation rate (UR) improved to 66% (from 60% in 4QFY24), but blended ASP declined by -2% QoQ. TOPG is confident to turnaround in FY25E on better sales volume and ASP. The house maintain its FY25-27E earnings and MYR1.08 TP on 1.8x CY26E P/B. Maybank IB reiterates its SELL position believing 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, the house said it expects stronger earnings ahead on higher plant UR and ASPs from increased US orders.
Key highlights from 1QFY25 results
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. 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 is maintaining its earnings forecasts. The concerns it said remains with TOPG's significant 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 house expects Top Glove's Chinese counterparts to divert their US sales to these markets starting Jan 2025. 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
