Rubber Products (Gloves, Condoms etc)

[winston]

Supply of gloves continues to outstrip demand

By DANIEL KHOO

Destocking activity persisted, driven by excess customer inventory, resulting in a softer order book.

Aggravating the situation was the ongoing glove oversupply situation combined with a lack of customer urgency to place orders in light of shorter delivery times from lower manufacturer utilisation.

A global demand of 300 billion pieces is expected for 2023. In 2019, Malaysia exported about 167 billion pieces or about 67%.

China manufacturers have lower fuel costs by using coal.

Glove makers may only reach operational breakeven closer towards mid-2024.

Source: The Star

https://www.thestar.com.my/business/bus ... e=smartech

[winston]

Rubber Gloves
Not completely out of the woods yet

We reiterate our Underweight view on the Malaysian glove sector amid market optimism over a potential recovery in ASPs from 2Q23F onwards.

In our view, quantum of ASP hikes remains insufficient to fully pass on higher costs while we expect sector utilisation rate to remain muted in the near term.

We expect glove makers under our coverage to remain loss-making up until 1Q24F despite narrowing losses on a quarterly basis going forward.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 01244098EB

[winston]

Kenanga advocates investors to avoid glove sector for now

by Surin Murugiah

Challenging and competitive business landscape ahead, due to elevated costs, subdued average selling price and massive capacity leading to suppressed industry utilization rate.

Begs to differ from the view of Malaysian Rubber Glove Manufacturers Association (MARGMA) that the industry will turn the corner in 2023 as its demand-supply forecast shows that it will take at least another two years of consistent demand growth to fully fill the current excess capacity in the industry.

Kenanga projected the demand for gloves to rise by 15% in 2023, which is consistent with MARGMA’s forecast.

Not helping the already dire situation is the reluctance of customers to commit to sizeable orders and holdsubstantial stocks on expectations of further decline in prices.

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/662688

[winston]

Profitability of Malaysia’s glove sector still lacks visibility, JPMorgan says

by Surin Murugiah

The research house reiterated its bearish stance, as overcapacity-led average selling price (ASP) weakness will continue until at least end-2024.

JPMorgan said its channel checks suggest that ASP hike requests by Malaysian players had been met with reduced orders, while Chinese players maintained their discounts to Malaysians.

It said excess capacity, the main factor that caused industry losses, should take two years to digest, even if expansions are halted and old capacity is retired.

It said at current price-to-book value (P/B) valuations of 1.4 times to 1.6 times, stocks appear to be pricing in more than profit normalisation.

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/663188

[winston]

Glove sector still plagued with low prices, depressed utilisation despite early signs of consolidation

Based on our estimates, the demand-supply situation will only start to head towards equilibrium in 2025, when there is virtually no more new capacity coming on stream, while global demand for gloves continues to rise by 15% per annum underpinned by rising hygiene awareness.

Kenanga’s ratings include Hartalega (underperform; target price: RM1.90), Top Glove (underperform; 90 sen), Kossan Rubber Industries Bhd (underperform; RM1.28) and Supermax Corp Bhd (market perform; 96 sen).

Kenanga’s 2023 forecasts assume an average selling price per 1,000 pieces of US$20 (RM92.08), translating into an estimated 10% decline over 2022, and an average plant utilisation rate of 50%, versus an estimated 60% in 2022. It does not have any top pick for the sector.

Source: The Edge

https://theedgemalaysia.com/node/670156

[behappyalways]

Uneven recovery for glove players
https://www.thestar.com.my/business/bus ... ve-players

[winston]

Glove players still facing headwinds, says PublicInvest Research

By Surin Murugiah

PublicInvest continues to believe that the industry’s overall utilisation rates will remain below breakeven levels due to weaker global demand for gloves.

Moving into 2HCY2023, we are not expecting a meaningful turnaround in profitability.

Losses should persist on the back of pricing pressure from China, muted demand as well as elevated electricity and labour costs.

Despite this, we are not expecting the Malaysian producers to achieve breakeven level anytime soon as utilisation rates should remain low (at around 50% or below) due to the weak global demand.

Customers are still reluctant to place sizable orders as they are able to receive their deliveries in a shorter time period.

Source: theedgemalaysia.com

https://theedgemalaysia.com/node/673431

[winston]

Glove makers will not achieve profitability in the near future, HLIB says

By Surin Murugiah

Although it expects input costs to potentially reduce, it does not envision glove makers to reap substantial benefits from this, as it sees the savings to be shared with buyers in order to defend market share in this challenging environment.

We project that demand-supply equilibrium will likely only be attained in 2HCY24f or CY25f.

The research house said that moving into 2H23, latex prices are expected to ease due to the end of wintering season, while nitrile butadiene prices will remain depressed due to excess supplies.

Source: theedgemalaysia.com

https://theedgemalaysia.com/node/674124

[winston]

Gloves – Malaysia
Downgrade To MARKET WEIGHT As Recovery Prospects Appear Priced In

Sector margins are expected to improve, with the worst behind them.

This stems from downtrending input costs outstripping ASPs.

Losses are expected to persist over the near term that should turn for the better, sharply moderating valuations in 2025.

Sector valuations now trade at -1SD to their five-year PE mean in 2025. But this appears to fairly
reflect the reward-to-risk payoff given the evolved dynamics for Malaysian producers
vis-à-vis pre-pandemic.

Downgrade to MARKET WEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... 377b383baf

[winston]

Gloves – Malaysia
First Hint Of Light At The Crack Of Dawn

After a dark period of eclipsing earnings and moderating demand from pandemic highs,
more optimism is flowing through the glove sector as key operating statistics seemingly
discovered an inflection point.

Nevertheless, restoring the pre-pandemic earnings dynamic remains challenging although the worst is likely over, with key resistance arising from China players’ capacity influx and aggressive stance on grabbing market share.

Maintain MARKET WEIGHT. Sector pick: Harta.

Source: UOBKH

https://research.uobkayhian.com/content ... cccc396847