CEO Morning Brief

Analysts Mixed on Top Glove, Target Prices Range From 63 Sen to RM1.43

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Publish date: Fri, 21 Jun 2024, 10:23 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (June 20): Investment analysts were mixed on the outlook for Top Glove Corp Bhd (KL:TOPGLOV) after the company posted a net profit of RM50.67 million for the third quarter ended May 31, 2024 against a net loss of RM130.59 million a year earlier.

Phillip Capital ascribed a target price (TP) of 60 sen, while Kenanga Research set its TP at 75 sen and RHB Investment Bhd at RM1.28.

Phillip Capital, which has a “sell” call on Top Glove, said the company’s results accounted for 86% of the research house’s previous loss forecast (-RM158 million) and 95% of consensus’ loss estimate (-RM144 million).

“The earnings beat was due to lower-than-expected operating costs. Despite 9MFY24 revenue declining 6% year-on-year, Ebitda margin rose 16 percentage points due to its cost rationalisation efforts,” it said.

Meanwhile, Kenanga, which has an “underperform” rating on Top Glove, said the glovemaker’s 9MFY2024 results met expectations.

“Its 9MFY24 losses narrowed as it shook off high-cost inventory coupled with savings from the decommissioning of inefficient plants.

“It guided for an uptick in orders on restocking by customers. Nonetheless, massive overcapacity will continue to weigh on the sector,” it said.

RHB Research, which maintained its “sell” rating on Top Glove, said despite weaker-than-expected results, recent improvement in the company’s operating dynamics and management’s commitment to a turnaround bodes well for Top Glove.

The research house said moving forward, order volume is set to pick up further (management guided for 20-25% quarter-on-quarter growth in 4QFY2024) on top of the three billion added capacity, which should start running this month.

Of the twenty analysts covering Top Glove listed on Bloomberg, only three feature “buy” calls, while target prices for the stock across the spectrum ranged from 63 sen at the lower end and RM1.43 being the highest.

Source: TheEdge - 21 Jun 2024

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