PETALING JAYA: With a weaker-than-expected earnings report earlier this week sparking concerns among investors over more challenging times ahead, shares of Top Glove Corp Bhd

have been trading close to its 2023 low.

The share price of the world’s biggest glove manufacturer was down one sen yesterday to 71 sen.

The glove maker’s net profit for its third quarter ended May 31, 2025 (3Q25), was down by 31% year-on-year to RM34.7mil.

This translated to a lower earnings per share of 0.43 sen, down from 0.63 sen in 3Q24.

Research houses took a cautious stance, with more “hold” and “sell” calls issued on the stock. Many have also cut their earnings forecasts for financial year 2025 (FY25) and FY26.

Earnings in 3Q25 were impacted by a temporary dip in demand from the United States and intensifying competition in the European market.

UOB Kay Hian Research (UOBKH Research) noted that management is, however, guiding for a 15% to 20% quarter-on-quarter increase in sales volume for the 4Q25, supported by improving demand and margin expansion as inventory levels at US distributors begin to normalise.

The research house said, as Top Glove’s June utilisation rate improved to 65% and on the back of declining raw-material costs and natural gas tariffs, it expects margin expansion.

It also expects US distributors to resume orders as overstocked inventories are depleted.

“The current US tariffs on China medical gloves are much higher than Malaysia.

“While this pushed US distributors to frontload their purchases between September and December last year, we estimate that the inventories are at a six to seven-month level. As such, beginning from the fourth quarter of this year, we expect Top Glove to see a meaningful surge in US orders, accompanied by better average selling prices,” the research house said in a report.

However, outside of the United States, analysts anticipate more aggressive price competition from China manufacturers.

Analysts said strengthening its competitiveness remains key to Top Glove’s long-term survival.

The group’s current breakeven cost for generic nitrile gloves stands at US$14 to US$15 per 1,000 pieces, which is on par with its Chinese peers.

“Despite earnings facing an upward slope to recover close to the pre-pandemic level, we think that Top Glove’s improving efficiency and cost base promise a gradual recovery in operating metrics. With a recent redemption of perpetual sukuk and borrowings reduction, its gearing ratio is also reduced to 0.1 times versus 0.85 times for FY19 and we expect stronger operating cash flow and balance sheet in the coming quarters,” said UOBKH Research.

Similarly, Maybank Investment Bank Research (Maybank IB) said pricing strategy remains the key driver of sales.

Maybank IB said to stay competitive, Top Glove is implementing ongoing cost-cutting measures to ensure its products are priced attractively compared with China’s glove makers, especially in non-US markets.

Its exposure to the US market rose to 26% of its 3Q25 sales volume, up from 23% in the previous quarter.

The group has also put its Vietnam expansion plans on hold pending greater clarity on US tariff policies and overall market conditions.

The research house said it remained concerned about intensifying competition, particularly from capacity in China targeting non-US markets and from the overseas plants of China companies focusing on the US market.