Top Glove can still relax again?
Analysts downgraded Top Glove on Monday to a 'sell' position after they reduced the target price (TP) between RM1.42 and RM2.05 as a result of the company's first quarter report ending November 30, 2021 (1QFY22) being below expectations.
Hong Leong Investment Bank Research analyst Sophine Chua in a note on Monday said the 1QFY22 Top Glove results were below expectations at 7% and 10% were due to lower -than -expected yields and reduced operating leverage.
Chua reduced Top Glove’s core profit forecast after tax after minority interests (PATAMI) for the financial year ended 31 Aug 2022 (FY22) to FY23 by 39% at RM644.8 million to 73% at RM877.3 million due to average selling price (ASP) low from forecasts and weak utilization rates.
In addition, RHB Research Institute analyst Sean Chew noted Top Glove’s performance plummeted due to weak demand leading to weak utilization rates.
Chew has reduced Top Glove's revenue forecast for FY22 by 60% at RN632 million, FY23 by 50% at RM580 million and FY24 by 45% at RM669 after revising its sales volume assumption by 18% to 26% as well as lowering Top Glove's trading position to ‘sell’ from ‘neutral’ after revising the TP for the stock to RM1.42 from RM2.85.
Next, Ng Chi Hoong, an analyst at Affin Hwang Investment Bank Research stated that Top Glove’s weak performance was because PATAMI 1QFY22 fell 70% year-on-year (q-o-q) at RM186 million with only 7% and 8% year-on-year forecast.
Ng has cut its revenue estimates for FY22 to FY24 by 26% to 62% (RM986.2 million, RM1.16 million and RM1.23 million) due to slower sales volume factors and delayed capacity expansion.
Meanwhile, Kenanga Research analyst Raymond Choo said the weak results of the Top Glove report were because sales volumes and lower -than -expected margins had made input raw material costs fall slower than a sharper fall in ASP.
For FY22, Choo reduced Top Glove’s earnings before interest, tax, depreciation and amortization (EBTDA) margin to 19% from 28%, reduced ASP to US $ 30 from US $ 32, reduced volume growth to 11% from 28% and calculated the tax rate effective higher by 28% compared to 20% previously due to prosperous taxes.
Last Friday, Top Glove released a weak 1QFY22 first quarter report.
