Top Glove delivered strong 1QFY13 earnings of RM57.5m on the back of lower raw material costs and improved operation efficiency. While the earnings were 9.5% weaker q-o-q due to the utilisation of a tax benefit in the last quarter, it was well within our and street estimates. We are generally upbeat on the company’s as well as the sector’s outlook. Although its share price has performed well this year, we are maintaining our BUY recommendation and RM6.25 FV, which still offers a 10% price upside.
A good start. Top Glove’s FY13 performance took off to a good start as its first-quarter net profit came in at RM57.5m (+82.9% y-o-y, -9.5 q-o-q) – well within our and consensus estimates. On a quarterly basis, net profit slid 9.5% as the group had utilised its tax benefit in 4QFY12. Overall, we attribute the commendable y-o-y results to easing raw material costs (latex and nitrile prices dropped 30% and 31% y-o-y respectively), improved production efficiency, as well as rising demand from the developed and emerging countries. Although revenue dipped 3.7% q-o-q, dragged down by lower average selling prices (ASPs), Top Glove still managed to reap a healthy margin of approximately 15.3% at the EBITDA level, backed by plunging raw material costs and better operating efficiency.
All is intact. As we highlighted previously, we think that the operating environment for glove makers is favourable in view of the lower raw material costs, stable exchange rate, and resilient global demand. Meanwhile, we believe the cost increments in labour wages and gas prices may not make a significant impact on glove makers. With the company’s immediate and long-term expansion plans to complete each of its three new factories d by April, June and August 2013 respectively, as well as upstream venture in rubber tree plantations firmly on track, we remain upbeat on Top Glove’s outlook.
Maintain BUY, with RM6.25 FV. We are confident that Top Glove is set to perform strongly this financial year, backed by its leadership in the medical gloves industry as well as positive outlook for the sector. Although the company’s share price has performed reasonably well so far, we think there is still a 10% upside potential to our FV of RM6.25, based on a 18.7x FY13f PE. Maintain BUY.
A good start. Top Glove’s FY13 performance took off to a good start as its first-quarter net profit came in at RM57.5m (+82.9% y-o-y, -9.5 q-o-q) – well within our and consensus estimates. On a quarterly basis, net profit slid 9.5% as the group had utilised its tax benefit in 4QFY12. Overall, we attribute the commendable y-o-y results to easing raw material costs (latex and nitrile prices dropped 30% and 31% y-o-y respectively), improved production efficiency, as well as rising demand from the developed and emerging countries. Although revenue dipped 3.7% q-o-q, dragged down by lower average selling prices (ASPs), Top Glove still managed to reap a healthy margin of approximately 15.3% at the EBITDA level, backed by plunging raw material costs and better operating efficiency.
All is intact. As we highlighted previously, we think that the operating environment for glove makers is favourable in view of the lower raw material costs, stable exchange rate, and resilient global demand. Meanwhile, we believe the cost increments in labour wages and gas prices may not make a significant impact on glove makers. With the company’s immediate and long-term expansion plans to complete each of its three new factories d by April, June and August 2013 respectively, as well as upstream venture in rubber tree plantations firmly on track, we remain upbeat on Top Glove’s outlook.
Maintain BUY, with RM6.25 FV. We are confident that Top Glove is set to perform strongly this financial year, backed by its leadership in the medical gloves industry as well as positive outlook for the sector. Although the company’s share price has performed reasonably well so far, we think there is still a 10% upside potential to our FV of RM6.25, based on a 18.7x FY13f PE. Maintain BUY.
Source: OSK
No comments:
Post a Comment