TOP Glove has drawn mixed reactions from analysts on the stock’s prospects, even as its latest fourth quarter financials pointed to underlying improvement.

Maybank Securities on Monday (Oct 9) upgraded its call on the glove maker to “hold” from “sell”, as its analyst Wong Wei Sum said she sees “more balanced” risk-reward in the stock following the group’s kitchen-sinking exercises.

In business terms, kitchen sinking refers to the strategy of recognising impairment losses and provisions in a company’s immediate financial statements, rather than over an extended period of time.

This comes after Wong observed lower-than-expected core net losses in Q4 FY2023, which she attributed to a decline in operating costs.

The research house has cut its 12-month price target to 77 sen from 80 sen to factor in higher FY2024 to FY2025 loss projections after accounting for the group’s FY2023 results, lower plant utilisation, and less favourable foreign exchange rates.

It nonetheless expects the group to book a turnaround in FY2026, with core net profit of RM127 million (S$36.9 million).

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UOB Kay Hian (UOBKH) reiterated its “hold” call on the stock though lowering its price target to 82 sen from 95 sen previously.

Like Maybank, the research house has trimmed its FY2024 and FY2025 forecasts to account for lower utilisation rates and average selling prices (ASPs), as UOBKH analyst Jack Goh said he anticipates a milder-than-expected industry recovery.

“Given depressed industry utilisation rates, stiff price competition continues to linger and orders remain smaller due to short delivery times,” Goh noted.

“Although the worst is over, we believe that Malaysian glove manufacturers will face an upward slope to restore their pre-pandemic profitability, given that the pandemic-induced oversupply and suboptimal utilisation will potentially take another six to eight quarters to normalise.”

Even so, the analyst acknowledged that “some light was shed” on Top Glove from its margin expansion in Q4 following moderate input costs and favourable foreign exchange rates, besides leaner operating expenditure after the group’s recent capacity rationalisation exercise.

“Risk-reward for Top Glove appears neutral at this juncture, given that an inflection point was discovered but restoration of the pre-pandemic industry-wide operating matrix requires matrix,” said Goh.

Meanwhile, Citi Research and AmBank Research maintained their “sell” calls on the stock with an unchanged price target and fair value of 68 sen and 60 sen, respectively.

Citi viewed Top Glove’s quarter-on-quarter improvement as “encouraging, but not unexpected”.

Its analyst Megat Fais noted that Top Glove’s Q4’s volumes were down 10 per cent on a quarterly basis, as the group prioritised pricing and margins over volume.

“We estimate Q4 volumes at 4.8 billion, taking full-year volumes to 23.3 billion, (at) 93 per cent of our assumption,” said Fais in a report on Sunday.

While he observed an improvement in the month-on-month volume trend, the analyst pointed out that feedstock volumes were still trending higher.

In his view, cost pass-through and further margin recovery could be hampered for the group.

“From here on, a sustained recovery in volume and signs of better pricing power are key for us to revisit our view on the stock and the sector as a whole.”

While AmBank noted a “material correction” in Top Glove’s share prices since late May this year, the research house highlighted that the stock trades at a price-to-earnings ratio of 37 times its FY2025.

This represents 1.9 times above its 10-year average of 20 times, which is high, in AmBank’s view, and “offers no dividend upside at this juncture”.

Its analysts are also expecting the group to achieve FY2026 net profit to represent year-on-year growth of 2.2 times, supported by recoveries in the group’s plant utilisation rate and ASPs.

Shares of Top Glove : BVA 0% on the Singapore Exchange were trading flat at S$0.22 as at 12.45 pm on Monday.