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HLIB sees tough operating environment for  TOPGLOV 7113 TOP GLOVE CORPORATION BHD, cuts target price to RM1.12

KUALA LUMPUR (June 3): Hong Leong Investment Bank (HLIB) Research has maintained its “sell” rating on Top Glove Corp Bhd at RM1.26 with a lower target price (TP) of RM1.12 (from RM1.33) and said the operating environment for Top Glove remains tough, owing to the demand-supply mismatch situation.

In a note on Friday (June 3), the research house said softening demand has also led to low utilisation rate of circa 60% and the average selling price (ASP) is still seeing some decline, albeit at a slower rate.

“The increase in operating costs should also lead to margin compression, as we opine it will be difficult for Top Glove to pass on the entire cost increase, due to vast glove supply available in the market.

“We cut our FY22-24 earnings forecasts by 4-42%, as we lower our ASP and utilisation rate assumptions, along with factoring in higher opex expectations.

“We retain 'sell' on Top Glove, with a lower TP of RM1.12 (from RM1.33). Our TP represents a valuation of 17.3x P/E on its FY23 EPS of 6.5 sen,” it said.


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