PETALING JAYA: Top Glove Corp Bhd is confident of strong demand recovery for its financial year ending Aug 31, 2025 (FY25) as replenishment activity picks up among customers, with the key US market continue to chart growth.

Kenanga Research said, in a report, that the company’s sales volume continues to rise month-on-month, and the trend is expected to pick up in subsequent quarters, underpinned by inventory rebuilding by distributors, indicating that demand recovery had gained momentum.

“Presently, its sales volume had strengthened 25% to 30% month-on-month, bringing utilisation rate to 65% to 70% versus our assumption of 55% in FY25, based on capacity of 64 billion pieces, compared with 45% in the third quarter of FY24,” the research house said.

Maintaining its “market outperform” call on Top Glove but raising the target price to RM1.02 from RM0.97 previously, Kenanga Research said the company’s management is optimistic that average selling prices (ASPs) would rise by 5% to 15% or US$0.80 to US$1.50 per 1,000 pieces due to the uptick in demand and mitigation against the appreciating ringgit against the US dollar.

“We raise our FY25 and FY26 forecast net profit by 39% and 42%, respectively, as a result of rising sales-volume assumptions,” the research house said, adding that with market expectations of losses and falling ASPs increasingly being priced in, value is seen emerging on a medium-term horizon.

It estimates that for every US$1 change in ASPs, the company’s earnings would be impacted by below 2% assuming ASPs of US$20 per 1,000 pieces.

Top Glove’s management also shared that exports to the United States, which account for 28% to 30% of the group’s geographical sales mix, continues to grow accounting.

“As an indication, Top Glove has seen its volume sales from the US market raising 20% year-on-year to account for 15% in the nine-month period of FY24 compared with the pre-pandemic average of 20% to 30%,” it added.

The research house said the outlook for the sector is supported by the weakening of predatory pricing by Chinese glovemakers as their capacity utilisation rises above 90% while revised US trade measures on gloves from China would see tariffs rising 50% in 2025 and 100% in 2026, which would primarily benefit Malaysian glovemakers.

Kenanga Research expects a rerating of glovemakers’ stock prices in anticipation of the positive near-term earnings outlook.

With a less acute oversupply situation, it estimates that the demand-supply situation will only start to head towards equilibrium in 2026 when there is no more net new capacity coming onstream while the global demand for gloves continues to rise by 15% per year.