Rubber Products (Gloves, Condoms etc)

[winston]

Malaysian glove makers cut global demand forecast

by Chester Tay

Lowered its 2022 projection for global glove demand to about 399 billion pieces from the previously estimated 452 billion pieces.

2022: Annual glove demand growth of between 10% and 12% during the year, driven by rising hygiene awareness.

2023: MARGMA expects global annual glove demand growth to improve further to between 12% and 15%.

Malaysia, which is estimated to produce 240 billion pieces of gloves in 2022, is expected to have 65% share of the global rubber glove market, followed by China (20%), Thailand (10%) and Indonesia (3%).

Source: theedgemarkets.com

https://www.theedgemarkets.com/article/ ... d-forecast

[winston]

Malaysian glove makers hit by supply glut, higher costs

Adjust to a drop-off in Covid-19-related demand on top of rising energy costs.

Top Glove: Sales volume sank 25% last fiscal year with declines in nearly every region, including a 43% drop in Asia, its biggest market.

Natural gas prices shot up roughly 60% over the course of fiscal 2022 amid Russia’s invasion of Ukraine, on top of minimum wage hikes of up to 36% in May.

There are also concerns that companies in China, where manufacturing is relatively cheap, will maintain their low prices to keep orders coming in.

Growing focus on environmental, social and governance issues.

Source: Nikkei

https://www.freemalaysiatoday.com/categ ... her-costs/

[behappyalways]

By that time we should in the midst of a deep recession and hence demand will have to revise downwards...


Glove supply-demand equilibrium in six to nine months, says Margma president
https://www3.theedgemarkets.com/article ... -president

[winston]

Glove stocks undergoing technical rebound

By ELIM POON

The recent rebound in share prices of glove companies might be due to news regarding the Covid-19 XBB Omicron subvariant, as well as the continued weakness of the ringgit versus the US dollar.

Fundamentally, there are no changes as low plant utilisation still persists amid intense competition.

Market demand for gloves remains muted as glove distributors’ inventories remain elevated and companies push back on their expansion plans.

The erosion of the average selling prices (ASP) for rubber has moderated to about US$24 (RM113) per 1,000 pieces in the recent quarter.

Rising input costs drove Top Glove to raise its ASP by 5% in order to maintain profitability in the near future.

Glove distributors are reported to hold six to nine months of inventories in hand at present.

As of August, industry utilisation rate was below 50% and this has caused glove companies to push back the commissioning of new capacities to the late 2023 or 2024.

the price of raw materials like latex and nitrile have eased. These products account for 45% of manufacturing costs.

RHB Research stated natural latex price has fallen by almost 26% from the average the peak of US$1.39 (RM6.56) per kg to US$1.03 (RM6.13) per kg.

This was a 11% drop compared with the five-year pre-pandemic average. Nitrile prices are down 27% year-to-date to US$1.53 (RM7.22) per kg.

Source: The Star

https://www.thestar.com.my/business/bus ... al-rebound

[winston]

Tough times remain

We advocate investors take profit on glovemaker stocks given the recent rally in their share prices (up 9.3-29.3% over the past seven days).

We do not see any fundamental reason for the rally as the sector outlook remains weak (oversupply situation and weak demand from buyers).

We have Reduce calls on three glove makers, and a Hold call on Kossan.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 0E9EC99B79

[winston]

RHB Research remains 'underweight' on rubber glove sector, expects demand to pick up only in 2H2023

by Izzul Ikram

Industry players are still unable to ascertain the timing of destocking activities from glove distributors at this juncture.

"Under a bull scenario, we expect such distributors' inventory levels to normalise by 1H2023 after taking into consideration the six- to nine-month normalisation period from our last update in September.

Our recent takeaways from the results briefings suggest an absence of restocking activities from the distributor front.

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/649878

[winston]

Low selling prices and depressed gloves plant utilisation will likely persist throughout 2023, Kenanga says

by Surin Murugiah

We beg to differ from the view of Malaysian Rubber Glove Manufacturers Association (MARGMA) that the industry will turn the corner in 2023 as our 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.

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

The global glove production capacity will grow by 16% to 595b pieces during the year

This will result in the excess capacity rising by 22% to 137 billion pieces from 112 billion pieces in 2022.

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/650687

[winston]

Malaysia Gloves Sector
Daunting outlook
Current rally may not sustain

While Covid cases may surge with the re-opening of China’s borders, this may not lead to significant improvement in earnings for glove makers due to their plant utilization rate which may stay low at the current <50%.

Any increase in orders could be easily absorbed, we believe.

We maintain our NEGATIVE stance on the glove sector and our view that the recent rally in
glove stocks will not sustain. Stock prices will eventually converge to fundamentals. Maintain SELL on TOPG MK, HART MK and KRI MK.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/297050.pdf

[winston]

Kenanga Research tells investors to avoid glove sector for now

by Surin Murugiah

Based on our demand-supply forecasts, it will take at least another two years of consistent demand growth to fully fill the current excess industry capacity.

We believe that the pivot is more likely to happen in 2024, and do not have any top pick for the sector.

Our 2023 forecasts assume:
(i) an ASP per 1,000 pieces of USD20, translating to an estimated 10% decline over 2022, and
(ii) an average plant utilisation of 50% vs. an estimated 60% in 2022.

During the 2014/2015 downturn, ASP of nitrile gloves went as low as USD17/USD18 per 1,000 pieces while industry utilisation was at around 65%-70%.

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/658220

[winston]

Gloves – Malaysia
4Q22: Upgrade To OVERWEIGHT As Bottom Has Been Sighted

The sector fell into unprecedented losses in 4Q22.

Sector losses are expected to continue but bottom out in 1H23.

Alongside improving ASP outlook and moderating costs, corporate losses should be narrow in 2H23.

Meanwhile, valuations are trading close to +1SD to merely recovering 2024 earnings, suggesting deep value when 2025 earnings are taken into perspective.

Given the favourable reward-to-risk payoff, we upgrade the sector to OVERWEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... 4cdb3ab9cf