BUSINESS

GLOVE SALES TO PICK UP IN SECOND HALF OF YEAR, PROFITABILITY TO IMPROVE -- RHB IB

02/04/2024 12:22 PM

KUALA LUMPUR, April 2 (Bernama) -- Rubber glove sales are expected to pick up by the second half of the year given more balanced demand-supply dynamics, leading to an improvement in glove makers’ profitability, said RHB Investment Bank Bhd (RHB IB).

Keeping its “overweight” call on the sector, it said that “with the industry’s excess capacity gradually phasing out, the sector should achieve demand-supply equilibrium by the end of 2024.”

“We also expect the risk of price competition from Chinese peers to gradually subside, premised on arising quality concerns resulting in higher rejection rates from the US Food and Drug Administration and Chinese players’ pivoting stance towards sustainability,” the investment bank said in a research note today.

RHB IB said “industry demand and supply dynamics are showing recovery signs as April and May order volumes look to have picked up sturdily”

“We think further gas tariff normalisation and ASP (average selling price) trend stabilisation could eventually propel profitability in 2024; expect a meaningful demand recovery trend by 2H 2024 before capacity expansions recommence by 2025/2026,” it added.

On the key downside risks, RHB said it includes weaker-than-expected demand, inability to pass on costs to customers and higher-than-expected operating costs.

On the demand for rubber products, it noted that Malaysia’s glove export volumes spiked 6 per cent month-on-month (m-o-m) in February, continuing its positive m-o-m growth for two consecutive months.

“Export value grew by 7 per cent m-o-m, of which m-o-m growth surpassed export volume growth, indicating that cost pass-throughs are picking up gradually,” it said.

-- BERNAMA

 

 

 

 

 


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