What’s next for Top Glove shares?

• Top Glove Corporation Bhd. (SGX: BVA) share price closed nearly 5% lower on Tuesday (20 September 2022)
• The medical glove maker’s stock was down 15% in the last five sessions
• It saw sales revenue decline 52% in the Q4 of 2022
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How did Top Glove fare in 2022?

Top Glove delivered a total sales revenue of 5.57 billion ringgit and profit after tax of 292 million ringgit for FY2022, equating to a decline of 66% and 96% respectively from FY2021.

For the fourth quarter (Q4) of FY2022, the glove manufacturing group posted a sales revenue amounting to 990 million ringgit (down 52% from Q4 FY2021), while posting a quarterly loss after tax of 42 million ringgit (down 109% from Q4 FY2021).

‘The glove industry is experiencing the effects of normalisation after delivering exceptionally high earnings over the past two years, due to the surge in demand for gloves and higher average selling prices (ASPs) during the pandemic,’ the group said of its performance.

The ‘softer performance’ also came as the ‘industry weathers an adjustment period, contending with the twin factors of oversupply coupled with excess stockpiling by customers during the pandemic,’ which has ‘led to a slowdown in orders’ and drop in ASPs.

Looking ahead, the group expects the business environment ‘to remain challenging’ into 2023, as customers continue to deplete pipeline inventories and glove demand/supply gradually equilibrates.

Top Glove stock price: what’s the latest forecast?

Top Glove shares are down by 73% in 2022, as demand for medical gloves began to normalise.

In terms of stock outlook, the latest analyst sentiments published by SGX StockFacts show a consensus rating of ‘underperform’, alongside a price target of S$0.33 on the stock.

The price target equates to a 57% upside potential from Top Glove’s last traded price of S$0.21.

UOB’s equity research team cut its price target from S$0.47 to S$0.30 while maintaining a ‘hold’ call following the group’s full-year results.

Analyst Philip Wong wrote that ‘the worst is yet to come’, as he expects earnings to decline further with demand-supply dynamics still ‘imbalanced’. However, he also noted that the ‘downside is increasingly limited with some producers already falling into losses’.

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