Prices of gloves likely to decline from H2
PETALING JAYA: Brokers expect demand for gloves to moderate as Covid-19 vaccines are being rolled out in an increasing number of countries.
Demand moderation is expected to be gradual and would not drop sharply in view of the greatly heightened healthcare and hygiene awareness.
BIMB Securities Research said the hike in glove average selling prices (ASPs) are expected to peak in the first half of 2021 and gradually decline from the second half, with the rollout of vaccines and rising competition.
“Although ASPs are unlikely to sustain at current levels in 2022, demand growth post Covid-19 will remain steadfast at 10% to 12% from higher global consumption due to structural change in gloves usage, ” said BIMB Securities Research.
The research unit expected Supermax to record a sequentially stellar performance in the upcoming two quarters on the back of higher demand and ASPs.
As glove ASPs are expected to continue to rise until at least the first half (increase by 3% to 5% month-on-month), BIMB Securities Research has revised its earnings forecast for Supermax for the next two financial years ending June 30 (FY21 and FY22) by 16% and 19% respectively.
For its second quarter ended Dec 31,2020 (Q2FY21), Supermax had posted a stellar hike in revenue to RM2bil (47.8% increase quarter on quarter, 418.5% higher year-on-year), while net profit jumped to RM1.1bil (34.2% jump quarter-on-quarter, 3,412% higher year-on-year).
“The record breaking results were mainly due to exponential surge in demand due to Covid-19 together with fully commissioning of plant #12 Block A and B, and higher glove ASPs (increase of 3% to 7% month-on-month during the quarter), ” said BIMB Securities Research.
Meanwhile, Supermax will add production capacity of 22.25 billion glove pieces per annum, making a total of 48.42 billion pieces per annum by end-2022.
Additionally, Supermax is planning to build new glove manufacturing plants in the United States (total allocation of US$550mil) and it is expected to kick start the project in the first half with commissioning stage starting H1,2022.
Supermax has declared a first interim dividend of 3.8 sen for Q2FY21, and BIMB Securities Research forecast a total dividend of 67 sen for the financial year ending June 30,2021 (FY21).
BIMB Securities Research has lowered its target price for Supermax’s stock to RM10.20 (from RM14.50 previously) as it rolled over valuation to 2022 estimated earnings per share of 73 sen pegged on price-to-earnings ratio of 14 times.
BIMB Securities Research maintained its “buy” call on Supermax, and said the company enjoys higher yield from its original brand manufacturer business model.RHB Research also maintained its “buy” call on Supermax, and said the company is a beneficiary of stable gloves growth demand of 8% to 10% annually.
The research unit said its “buy” call was premised on stronger earnings prospects in Q3FY21, and expected positive news flow from Supermax’s venture in the United States and a dual listing in Singapore.RHB Research lowered its target price to a discounted cash flow derived RM10.60 from RM13.25 previously.
https://www.thestar.com.my/business/business-news/2021/02/03/prices-of-gloves-likely-to-decline-from-h2
