KUALA LUMPUR (March 10): Top Glove Corp Bhd’s share price pared gains after rising as much as 26 sen or 5% to RM5.45 in morning trade today after the group reported yesterday a record quarterly net profit of RM2.87 billion for the second quarter ended Feb 28, 2021 (2QFY21), compared with RM115.68 million a year earlier.
The glove maker also declared a dividend of 25.2 sen a share for 2QFY21.
At 10.38am today, Top Gloves share price had pared gains at RM5.38, with a market capitalisation of about RM44.12 billion based on its 8.2 billion issued shares.
Yesterday, Top Glove said in a filing with Bursa Malaysia that its revenue grew to RM5.37 billion for 2QFY21 from RM1.23 billion a year earlier.
Meanwhile, cumulative net profit surged to RM5.23 billion for the first half ended Feb 28, 2021 (1HFY21), from RM227.11 million a year earlier, while revenue jumped to RM10.12 billion from RM2.44 billion, according to Top Glove.
The companys 2QFY21 dividend at 25.2 sen a share brought its cumulative 1HFY21 dividends to 41.7 sen a share, the group said.
Today, CGS-CIMB Securities Sdn Bhd analyst Walter Aw wrote in a note that Top Gloves 1HFY21 core net profit at RM5.4 billion was in line with CGS-CIMB’s and consensus estimates at 52% and 54% of the respective full-year forecasts.
Aw said CGS-CIMB maintained its “add” call for Top Glove shares with a target price (TP) of RM7.80.
“We are not overly concerned about a potential decline in [glove] average selling prices (ASPs) from 2HFY21 onwards as we have accounted for this in our ASP estimates for FY21-23, he said.
“Top Glove expects its nitrile [glove] ASPs (currently US$115 [RM474.89]/1,000 pieces) to decline by 3% to 5% month-on-month (m-o-m) from April 2021 onwards, bringing its ASPs nearer to the US$100/1,000 pieces mark.
“We view this as a given since Top Gloves ASPs are at a 25%-35% premium to its peers’, while its addressable market has been affected by allegations of labour abuse and the CBP (US Customs and Border Protection) has banned two of its US subsidiaries. We earlier inputed lower blended ASPs of US$61/US$41/US$32 (per 1,000 pieces) into our FY21/22/23 EPS (earnings per share) estimates, Aw said.
Meanwhile, Maybank Investment Bank Bhd (Maybank IB) analyst Lee Yen Ling said today Top Gloves earnings may peak in 3QFY21 and fall from 4QFY21 onwards as glove ASPs decline.
“ASPs will decline from here, Lee wrote in a note today.
She said although Maybank IB maintained its FY21-23 net profit forecasts for Top Glove, which already assumed lower ASPs ahead, Maybank IB reduced its FY21-23 EPS forecasts for Top Glove by between 4% and 14% on a higher share base as it assumed that the glove maker’s proposed listing in Hong Kong will go through.
She said Maybank IB downgraded its Top Glove share recommendation to “hold” from “buy” as it cut its TP for the stock to RM4.85 from RM8.65.
Kenanga Investment Bank Bhd, which raised its Top Glove net profit forecasts, however cut its TP for the glove manufacturers shares, according to analyst Raymond Choo Ping Khoon.
Choo wrote in a note today Kenanga raised its FY21 net profit forecast for Top Glove by 17% as Kenanga increased its glove ASP assumption from US$70/1,000 pieces to US$76/1,000 pieces for the glove maker.
“Our FY22 ASP assumption remains pegged at US$40/1,000 pieces. However, we raise our FY22E net profit [estimate] by 17% as we raise our volume growth assumption from 6% to 11%, he said.
He said Kenanga, which reiterated its “outperform” call for Top Glove shares, however downgraded its TP from RM8.50 to RM6.80 “due to the latest forward ASP guidance amid diminishing sentiment on the sector”.
Read also:Top Glove 2Q net profit surges 21% q-o-q to another record high of RM2.87b