Rubber gloves could experience growing demand in 2020

​On the back of a positive results season, the rubber gloves sector is seeing signs of an uptick in demand in subsequent quarters, says Kenanga research

On the back of a positive results season, the rubber gloves sector is seeing signs of an uptick in demand in subsequent quarters, says Kenanga research.

In a note, the research house said the 3Q results season came within expectations with volume growth of 6% and 14% recorded by Top Glove and Hartalaga respectively.

It said its ground checks showed demand for nitrile gloves is picking up again and players' new capacities are being swiftly taken up.

Based on its analysis, nitrile gloves market share could experience 30% growth in 2020.

In the latex segment however, the strong competition could negatively impact margins, said Kenanga.

The robust demand for nitrile gloves has led to longer delivery lead times to between 45 to 50 days as compared to 30 to 40 days previously.

"Although we are positive on growth in subsequent quarters underpinned by uptick in nitrile demand driven by re-stocking activities, players like TOPGLOV and SUPERMX could continue to be plagued with competitive pressure from low margin latex gloves (accounts for an estimated 50% of product mix for both players) which could offset the gains in the nitrile segment," it said.

Kenanga advised investors to focus on nitrile-centric players such as Hartalega and Kossan, whose product mixes comprise 95% and 75% nitrile respectively. Its top pick is Hartalega with a target price of RM6.

Top Glove and Supermax could face margins pressure as they are latex-centric with a 50:50 product mix between nitrile and latex.

Source: The Star

Posted on : 02 January 2020
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Last Updated : Thursday 21st May 2020