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Bullish accumulation gloves stocks are sunny after the rain.

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南洋商报 NYSP wrote a column · Sep 2 02:43
The Malaysian glove industry is gradually recovering, market participants believe that this is a good opportunity to accumulate glove stocks, and specifically mention High Top Glove. $KOSSAN (7153.MY)$ And HARTALEGA $HARTA (5168.MY)$

大众投行研究本周一在报告中,指手套行业显示出的复苏迹象良好,随着产品销售和平均售价上涨,这皆将成为推动业者营收增长的动力。

“在最新一轮季度业绩中,我们关注的手套业者产品销量皆有提升,推动了营收环比增长。”

根据大马统计局(DOSM)数据显示,我国手套出口额在上半年同比增长14%,制造量则同比上涨6%,因此,分析员预计整体的手套销量将继续攀升。

尽管顶级手套 $TOPGLOV (7113.MY)$ 仍处亏损,但贺特佳及高产柅品工业,都各别录得了36.7 million令吉和2680万令吉的核心净利。

定价地位更佳

“我们了解到,每1000只的手套平均售价在20至21美元浮动,比中国业者销售的17至18美元稍高。“

The analyst continued to say that as customer inventories deplete, they are more willing to accept price increases, which has also narrowed the price gap between Malaysia and Chinese industry players, indicating that market price competition will be more intense.

However, we are bullish on Malaysian players being able to achieve better pricing through continuous increases in average selling prices, supported by stable demand.

At the same time, the factory utilization rates of Malaysian glove manufacturers have improved recently. Among them, the utilization rate of High-pro Rubber Industries has increased from 50% at the end of the 2023 financial year to 60%; Hartalega has increased from 73% to 78%; and Top Glove's utilization rate remains at 50%.

This is because major players are increasing production capacity to meet the growing demand for gloves.

Meanwhile, according to analysts' observations, although the increase is not significant, glove raw material prices continue to rise.

We expect overall raw material prices to return to normal in the second half of the year, thereby supporting the growth space of operating profit margins.

The strengthening of the ringgit does not affect profitability.

In addition, although the ringgit is strengthening against the US dollar $USD/MYR (USDMYR.FX)$ The exchange rate rebounded strongly, but it is expected to have minimal impact on the profitability of operators because the normalized cost of raw materials denominated in US dollars can hedge against fluctuations in glove prices.

Therefore, even if there are fluctuations in the currency exchange rate, it will not significantly impact the operating costs or profits of operators.

Regarding the M outbreak, analysts estimate that it will not cause widespread lockdowns on the scale of the COVID-19 pandemic.

Although there have been new M cases in Southeast Asia, there have not been any related cases reported domestically, and the M vaccine is readily available. We believe that it will not drive glove demand in large quantities like the COVID-19 pandemic, so we take a neutral stance on the matter.

Overall, as the recovery trajectory of glove stocks becomes clearer, analysts have raised their ratings on this sector from 'neutral' to 'shareholding' and are optimistic that the profitability of operators will continue to improve.

Analysts also believe that now is a good time to accumulate glove stocks, especially optimistic about the prospects of high-yield palm oil industry and Hartalega, with ratings upgraded to 'outperform the market'.
It is worth noting that glove stocks have long been excluded from the FTSE Bursa Malaysia KLCI. $FTSE Bursa Malaysia KLCI Index (.KLSE.MY)$ When will it return to its peak?
How will other glove stocks perform? Please comment below.
Source of information: Nanyang Siang Pau
Disclaimer: This content is for reference and educational purposes only, and does not constitute any specific investment, investment strategy, or endorsement. Readers should bear any risks and responsibilities resulting from relying on this content themselves. Before making any investment decisions, be sure to conduct your own independent research and evaluation, and consult with professional advisors when necessary. The author and related participants are not responsible for any losses or damages caused by the use or reliance on the information contained in this article.
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