Hong Leong Investment Bank (HLIB) has maintained its NEUTRAL stance on the glove sector, saying structural oversupply remains the main industry concern despite differing ESG strengths among Top Glove Corp Bhd, Hartalega Holdings Bhd and Kossan Rubber Industries Bhd.
In its latest ESG Focus report, the research house said it did not directly compare the glove makers’ ESG target performance because their targets differ in scope and timelines, with Top Glove targeting FY28, Hartalega FY29 and Kossan FY35.
Instead, HLIB assessed the comprehensiveness of target-setting and disclosure across environmental, social and governance areas.
On environmental targets, Top Glove was viewed as having the broadest coverage, although HLIB said its water- and effluent-related targets were less comprehensive than Kossan’s.
Hartalega had the least comprehensive environmental target coverage, according to the research house, with no interim annual targets to allow investors to track progress towards its FY29 objectives.
HLIB also noted that Hartalega currently provides less visibility on plans to expand its Scope 3 emissions coverage, while Top Glove and Kossan are working to broaden their reporting.
On social factors, Hartalega ranked strongest, having expanded its FY26 targets to include health and safety as well as human rights.
HLIB highlighted Hartalega’s more detailed human-rights targets, including maintaining external audit ratings, zero tolerance for child labour and human-rights violations, minimum-wage compliance and gender representation in management.
The research house said such disclosure is particularly relevant given the glove sector’s historical scrutiny over labour and human-rights practices.
For governance, Kossan stood out for addressing structural oversupply risks from Chinese competitors through targets focused on business continuity, automation, digitalisation and innovation.
HLIB said Kossan’s quantified approach provides investors with better visibility on its efforts to reduce manual labour per glove and improve cost competitiveness.
However, it said Kossan trails peers in setting cybersecurity-related targets, an area that could become more important as the company increases its use of digital systems and data storage.
Despite the ESG progress across the sector, HLIB kept its earnings forecasts unchanged and retained its NEUTRAL call.
The research house said elevated oil prices are expected to be temporary, with Brent crude forecast at US$95-US$100 per barrel in 4QCY26 before easing to US$75 in CY27.
HLIB believes that period of higher oil prices is unlikely to be long enough to create a prolonged nitrile butadiene rubber shortage that would force weaker glove producers out of the market.
As a result, it expects structural oversupply concerns to persist, although recent share-price corrections have improved the sector’s risk-reward profile.
