CGS International has upgraded its rating on the Malaysian rubber glove sector from “Underweight” to “Neutral,” citing an accelerating market recovery driven by scaled-back expansion from Chinese competitors and market share gains by domestic manufacturers.
According to a research note by the investment bank, the global glove market is on track to reach a healthy demand-supply equilibrium by early 2029. Consequently, the research house raised the sector’s earnings forecasts for calendar years 2026 to 2028 (CY26–28F) by 3% to 5% to reflect expanding profit margins.
A key factor driving the sector’s turning point is the slower-than-expected overseas capacity expansion by Chinese glove makers.
While Chinese manufacturers sought to set up operations in Southeast Asia to circumvent US import tariffs, their expansion plans faced headwinds from origin-based duties, limited local subsidies, and regulatory constraints. Actual overseas nitrile capacity expansion by Chinese peers reached approximately 10 billion pieces in 2025, significantly below CGS International’s initial projection of 17 billion pieces.
Combined with approximately 11 billion pieces in global factory shutdowns, the reduced Chinese expansion is speeding up the resolution of the structural oversupply that has plagued the sector post-pandemic.
Malaysian Producers Reclaim Market Share and Margin Growth
Malaysian glove makers have successfully recaptured global market share, which rose from 48% in FY24 to 50% in FY25. This rebound was largely driven by US import tariffs introduced in January 2025, which eroded the pricing competitiveness and profit margins of Chinese producers.
CGS International projects operational profitability to steadily improve:
Earnings Before Interest and Taxes (EBIT) for Malaysian producers are forecast to rise from US$1 per 1,000 pieces in CY25 to US$2.60 by CY28F, up from a quarterly average of US$1.30 over the past four quarters.
The sector currently trades at a forward Price-to-Earnings (P/E) ratio of 11.9x CY28F, positioning it one standard deviation below its pre-pandemic mean (CY12–19). However, Return on Equity (ROE) is expected to reach 7% by CY28F, remaining well below pre-pandemic historical levels of 18% to 24%.
Top Stock Picks and Sector Outlook
Top Glove Corporation Bhd remains CGS International’s top pick in the sector, trading at a slight discount to peers at 11.7x CY28F P/E. The research house highlighted Top Glove’s dormant capacity of approximately 25 billion pieces, which offers a first-mover advantage to rapidly ramp up production without committing significant new capital expenditure if sudden supply shortages occur.
Additionally, CGS International upgraded Kossan Rubber Industries Bhd from “Reduce” to “Add,” citing potential earnings upside from the group’s strategic focus on the higher-margin cleanroom glove segment.
