Rubber Products (Gloves, Condoms etc)

[winston]

Covid-19 driven tailwinds are subsiding

We downgrade the sector to Neutral from Overweight, due to weaker earnings prospects (declining ASPs and aggressive capacity build-up).

Overall sector valuations (17.1x CY23F P/E vs 5-year historical mean [2015-2019] :19.5x) have largely priced-in the sector’s weaker earnings prospects.

We believe, current sector valuations will be supported by:-
i) solid dividend yields
ii) strong balance sheets and
iii) subsiding ESG risks

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 0E248D4C31

[winston]

Temporary hiccup but sentiment hit

We are negatively surprised by the latest development in the glove sectorwhere Top Glove, Hartalega and Kossan have initiated a full shutdown of their glove manufacturing facilities in Selangor due to the enforcement of the EMCO.

While the impact on glove companies’ earnings will be temporary, investors’ sentiment on glove counters could be further hit by the latest development over the short term.

We maintain Neutral on the glove sector pending further information.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/226167.pdf

[winston]

Demand for gloves to stay strong

“The MRC estimates the global demand for rubber gloves in volume terms to maintain double-digit growth of between 12% and 15% in 2021” .

Source: The Star

https://www.thestar.com.my/business/bus ... tay-strong

[winston]

Gloves – Malaysia
2Q21: Slippery Road To Moderation

The 2Q21 reporting season saw slight sequential growth.

It also signifies peak quarterly earnings.

The road to moderation appears to be swifter than expected.

Furthermore, we believe deferred capacity expansion and sub-optimal utilisation rates may not be fully factored in yet.

This underlines possible further downside.

We believe sentiment could be further weighed by disappointment to consensus expectations.

Given the downside risks, we maintain UNDERWEIGHT on the sector.

Source: UOBKH

https://research.uobkayhian.com/content ... f110c28d00

[winston]

HLIB Research downgrades rubber glove sector due to expected lower ASPs ahead

by Emir Zainul

Glove makers are expecting ASPs to gradually decline by 30% quarter-on-quarter (q-o-q).

ASPs should reach US$30 (about RM124.47) per thousand pieces by the first quarter of 2022 (1Q22), which would still be higher versus pre-Covid-19 levels of US$22 per thousand pieces.

HLIB Research has downgraded its ratings of both Hartalega Holdings Bhd and Kossan Rubber Industries Bhd to "hold" with lower target prices (TPs), but maintained its "buy" rating of Top Glove Corp Bhd.

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/585282

[behappyalways]

Rubber products sector supernormal earnings on final legs: RHB
https://www.theedgesingapore.com/capita ... l-legs-rhb

[winston]

Malaysia Gloves Sector
Not the time for bottom fishing

ASP downturn yet to find bottom; D/G to NEGATIVE

ASP is declining fast and could hit pre-Covid levels by mid-2022 i.e.another -42% from current level of about USD40/k pcs in Sep 21.

With the stiff competition from China, we believe the Malaysian glove sector is experiencing a structural change and the oversupply situation could
potentially extend longer than the typical downcycle of 6-9 months.

A strong balance sheet is hence paramount to surviving the inevitable price war.

We D/G the sector to NEGATIVE (from NEUTRAL). We are SELLers for Top Glove, Hartalega and Kossan.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/236359.pdf

[behappyalways]

Can rubber glove newcomers still get a slice of the pandemic-driven super profits?
https://www.theedgemarkets.com/article/ ... er-profits

[behappyalways]

JP Morgan slashes TP for glove makers to pre-Covid levels, warns market underestimating ASP bottoming risk
https://www.theedgemarkets.com/article/ ... estimation

[winston]

Gloves – Malaysia
3Q21: Bottom Yet To Be Sighted

The 3Q21 ASP-led dismal earnings were compounded by curtailed volume output
during the national lockdown.

The decline was softened by moderating input costs.

ASPs remain above pre-pandemic levels at this juncture but profitability per glove is
approaching normality.

Furthermore, we believe deferred capacity expansion and suboptimal utilisation rates may not be fully factored in yet.

This underlines possible further downside. Given the downside risks, we maintain UNDERWEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... 3f55675a41