TOP Glove Corp Bhd’s record breaking earnings feat of RM2.4 bil in a single quarter – a mere timespan of three months – can be deemed a ‘business miracle’ given the feat was achieved in a pandemic-stricken economy.
Maybank IB Research summed up the achievement best in its results review with “best is yet to come” by expecting the glove maker’s subsequent quarter – 2Q FY9/2021) – to rake in an even better net profit of RM3 bil.
This is given Top Glove has guided for its blended average selling price (ASP) in 2Q FY9/2021 (December-February period) to further rise by 30% quarter-on-quarter (qoq) despite a spike in raw material cost (namely natural rubber and nitrile rubber).
“(Therefore), flattish sales volume from the two-week plant closure impact (from the imposition of the enhanced movement control order till Dec 14) could be offset by the capacity growth (+10% qoq),” opined analyst Lee Yen Ling.
All-in, Maybank IB Research maintained its FY9/2021E earnings per share (EPS) but raise its FY9/2022-23E EPS by 50%/73% on higher ASPs.
Although it retained its “buy” rating on Top Glove, the research house lowered the target price to RM8.65 (from RM9.53 previously) to account for the company’s social compliance issues and long-term growth of 4.5%.
Hong Leong Investment Bank (HLIB) Research was even more bullish of the world’s largest glove maker as the research house increased Top Glove’s FY2021-2022 earnings projection by +83% and +68% respectively to reflect better revenue contribution supported by further increase in ASPs assumption with expectation of continuous robust demand in FY9/2021.
The research house retained its “buy” rating on Top Glove with a higher target price of RM11.05 (previously RM10.38).
At 10.30am, Top Glove was up 16 sen or 2.34% at RM7 with 16.42 million shares traded, thus valuing the company at RM57.38 bil. – Dec 10, 2020
