PETALING JAYA: Domestic glovemakers can expect a healthy market equilibrium to take share in early 2029 on the assumption of an 8% year-on-year (y-o-y) demand growth from this year onwards, says CGS International (CGSI) Research.

The research house, which reaffirmed a “neutral” call on glovemakers, said medical gloves would lead demand despite caution on capacity expansion among Chinese glovemakers in the South-East Asia region that remains a key factor in the demand-supply outlook.

More than 20 companies across the global glove supply chain it spoke to at the recent International Rubber Glove Conference & Exhibition 2026 said demand continues to recover steadily across key end markets, with industry participants generally expecting 5% to 10% y-o-y growth from 2026 to 2029.

“Utilisation rates have also improved, with most producers currently operating at 70% to 80%, approaching the 85% to 90% range that many industry participants associate with a balanced market,” it said.

“We believe these trends reflect a gradual normalisation of operating conditions following several years of disruption.

“While recovery remains uneven across regions and customer segments, order flows and production activity continue to trend positively,” it added.

It noted that glovemaker valuations have now been fairly priced into the earnings recovery, although profitability remains subdued, with the 2028 return on equity of 7% still well below the pre-Covd-19 pandemic range of 18% to 24%.

“We believe the recently announced average selling price (ASP) increases by Chinese glove manufacturers are unlikely to materially lift earnings for Malaysian glove producers,” it said, believing the move to be a pre-emptive response to rising costs.

The research house has maintained an “add” call on Kossan Rubber Industries Bhd

, also the house’s top pick, with a target price (TP) of RM1.40 on healthy demand as well as potential for ASP increases to facilitate cost pass-through and support margin expansion.

“We believe cleanroom gloves could drive an earnings re-rating over the next one to two years, supported by spillover demand from upstream artificial intelligence and data centre supply chains,” it said.

CGSI Research added that Kossan’s plan to double cleanroom glove capacity to 800 million gloves would lift earnings before interest and tax (Ebit) margins to 13% by the financial year ended Dec 31, 2028 from 10% in FY25.

It has revised Hartalega Holdings Bhd

to a “reduce” call from “hold” but with an unchanged TP of RM1 as current valuations at 14.9 times 2028 price-earnings (PE) more than the price in its growth trajectory.

It shared that while the company expects demand and utilisation to remain healthy, there remains risks from intensifying Chinese competition and limited ASP expansion potential as, despite cost optimisation efforts, “margins are recovering at a slower pace compared to peers and are unlikely to recover fully to pre-pandemic levels”.

It expects Ebit per 1,000 pieces to increase to US$2.70 in the third quarter ending Dec 31, 2029 (3Q29) from US$1.70 in 3Q27, driven primarily by cost optimisation and technology upgrade initiatives, but still well below the pre-Covid-19 average of US$4.40, reflecting the normalisation of premium market economics.

Furthermore, the research house has downgraded Top Glove Corp Bhd

to a “hold” from “add” with an unchanged TP of 82 sen, as its current valuation of 15 times 2028 PE seems fair versus 2012 to 2019 PE of 16.5 times.

“While sharing the industry’s view of improving demand, stronger utilisation and limited ASP expansion potential, Top Glove appeared more confident in its ability to navigate rising Chinese competition through cost competitiveness and market share preservation,” it said.