RHB Research maintains ‘buy’ with Top Glove Corp at RM 18.30 with 19 percent upside and 1 percent yield. The glove producer is expected to enjoy the highest ASP increase among original equipment manufacturer (OEM) players on its customer diversification.
This is caused by its higher pricing power as a major supplier to a diversified customer base, in which each client orders in smaller volumes.
“Due to four positive factors, we expect superb 3QFY20 (Aug) results (to be announced this month). Our TP implies 35.8x FY21F P/E, close to the 36x sector average,” the research house said.
The company’s orders are secured up to July 2021 with utilisation rate now almost full vis-à-vis normal levels of 80 to 85 percent before Covid-19.
“In the near term, we expect 3QFY20 net profit to surge 88% QoQ. In the long run, the company is a beneficiary of the long-term uptrend in global gloves consumption: 8 to 10 percent pa, even without Covid-19,” RHB Research said.