Thursday 28 Mar 2024
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KUALA LUMPUR (June 3): AmInvestment Bank Research has maintained its “Overweight” rating on the glove sector and said that selling prices will continue to soar for the next 12 months as lead time stretches up to 12 months.

In a sector note today, the research house said the glove companies’ earnings will be further pushed by expanded margins as raw material prices remain low, selling prices continue to grow, US dollar continues to strengthen over ringgit and expansion plans remain intact for the glove producers.

“Our house projection for the USD/MYR rate is an average of RM4.29 in 2020 and RM4.25 in 2021.

“We think that a stronger ringgit will even help further expand net margins for glove companies because unlike pre-Covid-19 times, cost savings are not passed through to customers due to supply constraints,” it said.

AmInvestment said glovemakers are now expecting glove demand to increase by roughly 30–50% (8–10% pre-Covid-19).

It said the higher demand has resulted in a shortage of supply, pushing up average selling prices for these medical gloves.

“Average selling prices (ASP) are trending upwards and glovemakers now guide for around 5–15% quarter-on-quarter gradual increases while spot selling prices for gloves skyrocketed 100–400% in the past few months as panic buying of gloves ensues.

“We raise our ASP assumptions for the glovemakers by around 2–9% . We believe selling prices will continue to grow in 2021 as a vaccine for Covid-19 is expected to take roughly 12–18 months to create,” it said.

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