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KUALA LUMPUR: Kenanga Research has kept a “superior performance” call to Top Glove Corp Bhd
after raising its net profit forecast for fiscal 2021 (FY21) by 40% to account for higher average sales prices.
“I increased the estimated net profit for fiscal year 21 by 40% after raising our average selling price (ASP) from US $ 55 per 1,000 pieces to US $ 70 per 1,000 pieces and assuming a utilization of 80% or 75 thousand million pieces in sales volume (taking into account temporary lost production at the Klang factories).
“Our assumption ASP for fiscal year 22 remains conservatively pegged at $ 40 per 1,000 pieces,” he said.
The research house said its price target over the counter remained at RM10.68 based on 11.5 times the 2021 earnings per share increase of 92.9 sen.
“We lowered our target price-to-earnings ratio because we believe earnings growth will moderate toward more sustainable levels beyond FY21. Despite this, there is still a big advantage at our price target of RM10.68. “
Following a conference call with Top Glove, Kenanga said management is confident of strong demand over the next two years due to continued acute shortages and increasing Covid-19 cases in Europe and the US.
“Looking towards the second quarter of fiscal 21, we highlight that Top Glove’s ASP in the second quarter of fiscal 21 is expected to increase by 30% quarter-on-quarter, with higher volumes (+ 10% of new capacities) and mix of products biased towards higher margin nitrile gloves, ”he said.
Meanwhile, the group has already invested RM70,000 in more worker accommodation and upgrading existing ones, while spending RM20,000 to buy 100 apartments and rent more houses for its workers.
In the medium term, the group has allocated around RM 100 million to invest in facilities and accommodation for workers, including the construction of mega-hostels in Klang and Banting with a combined capacity of 7,300 pax fully equipped with a suite of amenities. and facilities.
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