KUALA LUMPUR, July 2 — The average selling prices (ASPs) of nitrile gloves are expected to average between US$65 and US$75 per 1,000 pieces in the second half of 2021 (H2), Hong Leong Investment Bank (HLIB) said.
Despite the decline in ASPs, it noted that supply shortage for disposable gloves still remains, with the crunch expected to last until 2023 before supply catches up with demand.
“With vaccines appearing less effective against certain new variants and upcoming winter towards year-end, we do not rule out the possibility of COVID-19 cases rising again, despite vaccination efforts in key markets. This would inevitably increase the demand for disposable gloves,” it said in a note today.
The investment bank lowered its financial year 2021/2022 net profit forecasts for Top Glove Corp Bhd by -3.3 per cent/-2.6 per cent, and Kossan Rubber Industries Bhd’s FY21 net profit forecast by -7.9 per cent to account for lower sales volumes from smaller workforce capacity during full Movement Control Order (FMCO).
The recently imposed FMCO mandates that glove manufacturers operate at 60 per cent workforce capacity from June 1-30 for the duration of the total lockdown.
Furthermore, in the government’s National Recovery Plan (NRP), Phase Two and Phase Three 3 (July-October 2021) continues to mandate that manufacturers operate at below full capacity (80 per cent workforce).
At the current price levels, it still expects healthy dividend yields for glove players to support share prices.
At current prices, glove players have FY21/22 dividend yields of 6.9 per cent to 19.2 per cent.
HLIB maintained its “Overweight” call on the rubber glove sector and adjusted downwards its target price for Top Glove (RM6.76 to RM6.72) and Kossan (RM5.60 to RM5.54).