Top Glove Corporation Berhad - Earnings Recovery Underway
Thu, 18-Dec-2025 01:44 pm
by Research Team • Apex Research

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TOPGLOV (7113)

Target Price (RM)

0.81

Recommendation

Buy

  • 1QFY26 CNP of RM39.0m (-7.2% QoQ, 1QFY25: -RM21.5m), representing 142% of our full year forecast and 25% of consensus. The overshoot was mainly due to faster-than-expected operational normalisation and stronger cost capture from lower input prices, which more than offset softer ASPs and FX headwinds.

  • We expect TOPG’s performance to trend firmer despite forex headwinds, supported by improving utilisation, gradual ASP stabilisation and ongoing cost discipline, which should underpin margin recovery.

  • We have revamped our model and raised FY26F/FY27F earnings to RM154.3m/RM205.0m (up 461%/579%), and introduce FY28F earnings of RM259.7m.

  • upgrade to BUY (from HOLD) recommendation with a higher TP of RM0.81 (from RM0.78), based on a higher P/B multiple of 1.3x (from 1.1x) rolled forward to FY27F BVPS of RM0.62 (from FY26F BVPS of RM0.70), and ascribed a three-star ESG rating.

 

Above expectations. Excluding exceptional items, namely forex loss (-RM4.0m), fair value and investment-related gains (+RM2.6m), and other net adjustments (+RM1.1m), 1QFY26 core net profit (CNP) stood RM39.0m (-7.2% QoQ, 1QFY25: -RM21.5m), representing 142% of our full year forecast and 25% of consensus. The overshoot was mainly due to faster-than-expected operational normalisation and stronger cost capture from lower input prices, which more than offset softer ASPs and FX headwinds.

 

Dividend. No dividend declared.

 

QoQ. CNP declined a modest 7.2% QoQ, primarily due to a 7% QoQ contraction in revenue amid softer ASPs, particularly in non-US markets. Blended ASP fell 2.8% QoQ to USD17.5/1k pcs (vs. USD18.0/1k pcs in 4QFY25), reflecting heightened pricing competition from Chinese producers. This was partially offset by a robust 17% QoQ increase in sales volumes on the back of recovering glove demand, supported by targeted marketing initiatives. In addition, lower raw material costs with natural latex and nitrile latex prices down 4% and 5% QoQ.

 

YoY. CNP recorded a sharp earnings turnaround YoY, driven by a recovery in sales volumes, led by a 117% YoY surge in US volumes following tariff-induced order shifts away from China. The stronger volume throughput lifted utilisation to c.75% in 1QFY26 (vs c.71% in 4QFY25), enhancing fixed-cost absorption and operating efficiency. Profitability was further supported by favourable raw material cost trends, which helped cushion the impact of a softer USD and reinforced margin recovery.

 

Outlook. Global glove demand is on a gradual recovery path, with 1H2026 demand expected to grow c.4% YoY as inventory destocking concludes and healthcare usage normalises. Early signs of US order replenishment, alongside a rebound in Europe in 2QFY26 driven by recently secured orders, point to firmer demand momentum. Higher utilisation rates and the recommencement of four additional factories (adding 6bn pcs of annual capacity) should enhance cost efficiency and support further order wins. On pricing, despite currency volatility, TOPG targets ASPs of USD17–19/1k pcs in FY26, underpinned by a better product mix and tighter cost control. Latex prices are expected to ease modestly, while nitrile input costs stabilise as demand normalises, supporting earnings momentum through improved operating leverage and margin recovery.

 

Earnings Revision. Following the change in covering analyst, we have revamped our financial model and raised our FY26F and FY27F earnings forecasts to RM154.3m and RM205.0m, representing upward revisions of 461% and 579%, respectively. The upgrades primarily reflect stronger-than-expected margin recovery and higher utilisation rates, pointing to a sharper earnings inflection. In tandem, we have revised our USD/MYR assumptions for FY26–FY27F to 4.15 (from 4.30), in line with our in-house macro projections. We also introduce our FY28F CNP forecast of RM259.7m.

Valuation. We upgrade TOPG to BUY (from HOLD) with a higher target price of RM0.81 (from RM0.78). We turn incrementally constructive on the earnings outlook and raise our valuation multiple to 1.3x P/B (from 1.1x), following the roll-forward of our valuation base year to FY27F BVPS of RM0.62 (from FY26F BVPS of RM0.70) and the assignment of a three-star ESG rating. Our applied P/B multiple of c. –0.5 SD below the 5-year forward mean reflects a conservative stance, despite improving earnings visibility and early signs of a sector recovery. We favour TOPG as profitability improvements have already begun to materialise from the previous quarter, supported by gradually firming sector sentiment. The recent share price pullback has further enhanced valuation appeal, presenting an asymmetric risk-reward profile ahead of a broader earnings recovery.

 

Risk. Increase in raw material prices, weakening of USD against MYR, policy changes such as US tariffs.

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Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

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