Top Glove - Maybank Kim Eng 2021-09-20: ASP Downtrend To Continue; Downgrade To SELL

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

Top Glove - ASP Downtrend To Continue; Downgrade To SELL


Challenging ASP outlook; Downgrade Top Glove to SELL

  • Top Glove (SGX:BVA)'s FY21 core net profit of MYR8.1b came in below our and consensus estimates. Management expects ASP to continue falling by -8% to -10% m-o-m in the coming quarters and will only stabilise in early 22.
  • We lower our FY22/23 EPS forecasts for Top Glove by -75%/-53% after lowering our FY22/23 average ASP assumptions to US$25.5/21.4 per 1,000 pcs. We now value Top Glove at MYR1.68 on a lower 12.7x CY23 PER (-1 standard deviation of historical mean [from -0.5 standard deviation previously], in line with Hartalega).
  • Downgrade Top Glove to SELL.



Top Glove reported weaker-than-expected FY21 results

  • Top Glove's 4QFY21 net profit of MYR608m (-48% y-o-y, -70% q-o-q) brought FY21 core net profit to MYR8.1b (+3.6x y-o-y), making up 79%/94% of our and consensus full-year estimates. The weaker-than-expected earnings performance was dragged by lower sales volume and utilisation rate as well as lower ASP of US$65/k pcs (vs. our assumption of US$73/k pcs).
  • A final dividend of MYR0.054 was declared (FY21: MYR0.651, +452% y-o-y), translating into 66% dividend payout ratio.


4QFY21: Lower sales volume, utilisation rate & ASP

  • Top Glove's 4QFY21 revenue declined by -49% q-o-q, -32% y-o-y on lower sales volume (- 20% q-o-q, -33% y-o-y) due to:
    1. the USA’s ban and seizure of its rubber gloves,
    2. lower blended ASP of US$48/k pcs (-31% q-o-q) and
    3. lower utilisation rate on National Recovery Plan 1 and EMCO.
  • Lower utilisation rate on production disruption and steeper decline in ASP versus raw material costs have led to lower operating margin. 4QFY21 EBITDA margin reduced to 37.4%, from 64% in 3QFY21.

Earnings adjustments






Wong Wei Sum CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-09-20
SGX Stock Analyst Report SELL DOWNGRADE HOLD 0.54 DOWN 1.280



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