Malaysia is expected to rake in RM21.8 billion revenue from exports of gloves this year, according to Hong Leong Investment Bank Bhd (HLIB) following a briefing by the Malaysian Rubber Glove Manufacturers Association (Margma).
Margma, said HLIB, had projected a 20 percent growth in global glove demand to 330 billion pieces this year. The growth is higher than the usual 8.0-10.0 percent annually.
As at March this year, Malaysia’s total glove exports rose 16.3 percent year-on-year (YoY) in terms of value, while quantity increased 14 percent YoY.
“Lead time of glove manufacturers are now at a minimum six-eight months while there are manufacturers that are looking at more than one year,’ HLIB said in a report.
The firm noted that blended average selling prices (ASPs) of nitrile gloves (US$80-US$160 per 1,000 pieces) are currently 50-60 percent more than natural rubber gloves (versus usual premium of 20-30 percent).
“Margma estimated an additional manpower of 25,000 (10,000 Malaysians and 15,000 foreign workers) is required to meet the increasing demand of gloves.
“With the government’s decision (on June 22) to freeze foreign worker intake until the end of 2020, this poses some challenges for the gloves sector. However, we understand that Margma is working with the government to push for further automation to overcome labor shortage,” it added.
HLIB has updated its earnings forecasts for all glove companies under its coverage due to the expected increase in ASPs.
It kept its “overweight” call on the sector, driven by a pandemic-fuelled demand.
HLIB’s top pick is Top Glove Corp Bhd (target price: RM31.31), being the largest glove manufacturer globally with vast clientele, readily supporting the increasing demand.