Kossan stands out as HLIB's sole 'Buy' in glove sector
The firm set a target price of RM2.30 for Kossan, and issued a "Hold" rating on Hartalega Holdings Bhd at RM1.48, and a "Sell" call on Top Glove Corp Bhd with a target price of 60 sen.
"Kossan distinguishes itself through its differentiated strategies and robust financial footing, against a challenging industry backdrop," HLIB said in a research note today.
HLIB said concerns over a supply-demand imbalance in the glove sector remain elevated, driven mainly by the aggressive expansion of Chinese, Vietnamese and Indonesian peers.
"Chinese Intco Medical's cost advantages, driven by automation and favourable input economics, continue to underpin its relatively aggressive pricing strategy.
"Transhipment flows from China via Thailand, Vietnam, and Indonesia are also displacing Malaysian exports and delaying volume recovery in the US market," it said.
HLIB noted that share prices for glove makers fell between 47 per cent and 59 per cent in 1H25, weighed by earnings misses and weak investor sentiment.
"Hartalega and Kossan missed both quarterly and consensus expectations in February, while Top Glove also reported below-par results in March.
"Investor confidence was further undermined by another round of earnings misses from Hartalega, coupled with a more bearish industry outlook guidance.
"We believe that the muted US demand faced by Malaysian manufacturers may also be linked to transhipment activities by Chinese peers," the firm said.
Meanwhile, HLIB expects average selling prices (ASPs) to stay subdued due to raw material prices and intense regional competition, as ASPs peaked in December 2024.
On global supply, HLIB projects an additional five to eight billion pieces per annum in capacity from Vietnam and 0.5 billion from Indonesia by the end of 2025.
"We estimated that Intco will add approximately 10 billion pieces per annum of glove production capacity from its operations in China alone in 2025," it added.
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