KUALA LUMPUR (Sept 14): Affin Hwang Capital Research has downgraded the rubber products sector to “Neutral” and said all glove companies within its coverage reported better 2Q17/1H17 results year-on-year (y-o-y) while margins rebounded sequentially as the industry demand-supply dynamics had improved.

In a note today, the research house said that moving forward, it  believea that automation and cost pass-through will be essential to protect margins while capacity expansion remains the key growth driver.

“The sector valuation has risen by 12.5% year-to-date.

“Nevertheless, we believe that the current sector forward P/E valuation of 19.2x has priced in the better prospects ahead and is no longer attractive.

“As such, we downgrade the sector to Neutral with Top Glove Corp Bhd as our sector top pick,” it said.