Over the past 2.5 years, the Malaysian rubber glove industry has gone through a prolonged destocking phase. However, according to JP Morgan's report, industry demand has recently shown signs of recovery. Cheong Hong Yuan points out that the stability of average selling prices (ASP) and the tightening supply-demand relationship have brought positive changes to the industry. In particular, companies like Hartalega Holdings Bhd and Kossan Rubber Industries Bhd have not only regained profitability but also become more cost-efficient, with an expected return to pre-pandemic profit levels by 2025. Meanwhile, Top Glove Corp Bhd is projected to achieve profitability only in the third quarter of 2024, with estimated profits in 2025 being 46% lower than in 2019. This differentiated recovery path demonstrates the different strategies and capabilities of major industry players in responding to market changes.
Cheong Hong Yuan emphasizes that investors, while analyzing industry recovery, should thoroughly understand the financial health, cost control capabilities, and market adaptability of each company. For example, Hartalega can save approximately RM20 million in depreciation and amortization expenses annually by closing less efficient production lines. Kossan, on the other hand, has RM2 billion in net cash, accounting for 43% of its market value, and generates approximately RM40-50 million in interest income each year. These factors will play a crucial role in the industry's recovery process.
Industry Trends and Investment Strategies in the Rubber Glove Industry
As the rubber glove industry gradually recovers, Cheong Hong Yuan proposes a series of targeted investment strategies. He believes that in the current market environment, investors need to pay more attention to companies' supply chain management capabilities, product innovation, and market expansion strategies. JP Morgan's report indicates that the industry's average selling price (ASP) has stabilized, which means companies need to enhance competitiveness by improving operational efficiency and utilization rates. For example, Hartalega and Kossan have demonstrated strong market adaptability through optimized production processes and cost structures.
Cheong Hong Yuan further points out that when considering investments in the rubber glove industry, investors should evaluate from multiple dimensions. In addition to financial indicators, research and development investment, market positioning, and future growth potential of companies should also be considered. For instance, Kossan's strong capital strength and robust financial position put it in a favorable position for future market competition. Meanwhile, JP Morgan holds an optimistic long-term outlook for the industry, expecting Hartalega and Kossan to recover to pre-pandemic profit levels by 2025.
