Top Glove - Maybank Kim Eng 2020-05-12: Earnings Surprises Ahead!

TOP GLOVE CORPORATION BHD (SGX:BVA) | SGinvestors.io TOP GLOVE CORPORATION BHD (SGX:BVA)

Top Glove - Earnings Surprises Ahead!


Raising EPS and Target Price; maintain BUY

  • With Top Glove (SGX:BVA)'s sales secured until Apr 2021 and some of its peers’ capacities also locked-in for the next 6-12 months, we expect the present positive environment to sustain into 1Q21. We raise our FY20-22E EPS by 54%/112%/5%, projecting for its EPS to increase by 128%/35% in FY20-21E and to fall 50% in FY22E.
  • Based on an unchanged CY21 P/E of 30x (+1SD to mean), our target price is raised to MYR10.95 (+73%). (Using FX rate of MYR1 to SGD0.3265, we derive target price of 3.58 in SGD term)
  • Key catalyst is its potentially superb upcoming 3QFY8/20 results (to release on 18th Jun).



Secured orders until Apr 2021

  • Top Glove has secured orders until Apr 2021 with its sales lead time stretched to 10 months now (from 5 months in Apr 2020 and 1.5 months before the COVID-19 outbreak). However, the ASPs quoted to customers are indicative ASPs and could still be revised 1-2 months prior to the deliveries.
  • Also, there have been some ad-hoc orders (c.3-5% of quarterly total sales) with ASPs substantially higher than the market’s ASPs. Top Glove's plant utilisaton rate has risen to c.97% (from 85% in 2QFY8/20) and it is sticking to its expansion schedule (refer to Figure3 in attached PDF report).


Sector-wide ASP hikes

  • In addition to Top Glove, we also note that other key players have fully-sold their capacities for the next 6-12 months (Kossan: sold until end- 2020, Sri Trang Agro-Industry (SGX:NC2): latex gloves capacity is sold until Mar 2021 while nitrile is sold until Jun 2021). The sector ASPs have been rising since Mar 2020 and we expect the present ASPs to sustain into 1Q21.


3QFY8/20: To beat consensus significantly






Lee Yen Ling Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-05-12
SGX Stock Analyst Report BUY MAINTAIN BUY 10.95 UP 6.320



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