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KUALA LUMPUR (Dec 10): Some analysts covering Top Glove Corp Bhd raised their earnings forecasts for the glove-making giant but kept their price target (TP) for the counter.
The move is considered unusual, as an increase in earnings forecasts generally leads to an upward revision of TPs, or for stocks that do not have “buy” calls, an improvement in recommendations.
Raymond Choo of Kenanga Research noted that Top Glove’s first quarter ended November 30, 2020 (1QFY21), after-tax earnings and minority interests of RM2.38 billion were at 36% of Kenanga’s forecast for the full year and 26% of the consensus estimates.
It has increased its net profit forecasts for fiscal year 21 by 40% after raising its assumption of average selling price (ASP) to $ 70 per 1,000 pieces, from $ 55 per 1,000 pieces previously, and assuming a utilization 80% of 75 billion pieces in sales volume. taking into account the temporary loss of production at Top Glove’s Klang factories. Your assumption ASP for fiscal year 22 remains conservatively pegged at $ 40 per 1,000 pieces.
For the financial year ending August 31, 2021 (FY21), Choo expects Top Glove to post a net profit of RM9.34 billion and a net profit of RM4.1 billion in FY22.
Still, Choo has kept his “top performance” call on Top Glove with an unchanged TP of RM10.68 each.
“We lowered our PER (price-to-earnings ratio) rating because we believe valuations are already tied to supernormal earnings; therefore moderation in earnings momentum beyond this phase should be taken into account. Its merits are: ( i) resilient earnings base due to its pricing power and overall capacity size in the industry, and (ii) strong earnings growth averaging over 100% in fiscal year 21 in compared to PER six times, “he explained.
Meanwhile, in a note to clients, JF Apex Research’s Nursuhaiza Hashim opined that the 2.38 billion ringgit quarterly profit was substantially above the research house’s expectations by 50%, but in line with estimates. from the street by 27.9%.
It revised its forecasts for Top Glove’s net earnings for fiscal years 21 and 22 by 70.2% and 138.5%, respectively, to RM8 billion and RM3.1 billion.
“This is based on expectations of a better profit margin and higher ASP assumption (+ 30%) for fiscal years 21 and 22. normalizing in fiscal year 22, an increase of 62% year-on-year,” he said.
Nursuhaiza has kept its call “on hold” plus an unchanged TP of RM6.83 for Top Glove.
AmInvestment Bank Research’s Thong Pak Leng raised its fiscal year 21 profit forecasts by 21% to RM7.9 billion after increasing its assumed ASP to US $ 80 per 1,000 pieces while lowering the average utilization rate. to 70% from 80%.
“We increased our ASP assumption for Fiscal Year 21 following management guidance and also the fact that the spot price has reached US $ 150-US $ 180 / 1,000 pieces in recent months, while the reduction in the Utilization rate reflects the temporary closure of some factories due to Covid-19 detection and quarantine for their workers, “Thong noted.
Thong has made no changes to the research house’s numbers from FY22 to FY23. Following the fiscal year 21 earnings review, you expect Top Glove to pay a total dividend of 48 sen, which translates to a 6.9% return.
Thong has kept his call “on hold” and RM7.07 TP.
Meanwhile, Alan Lim of RHB Research increased his forecasts for fiscal year 21 by 13% to RM10.7 billion, and the dividend per share increased to 72 sen from 58 sen after assuming a higher pay rate of 55 %. Their forecasts for FY22 to FY23 are unchanged at RM7.25 billion and RM4.48 billion respectively.
Lim has kept his “buy” call and RM9.50 TP for Top Glove.
Top Glove achieved its highest quarterly net profit of RM2.38 billion in 1QFY21, thanks to record revenue of RM4.76 billion. Its earnings per share increased to 29.64 sen from 1.5 sen a year ago.
It declared a dividend of 16.5 sen per share, the highest interim dividend in the group’s history. This translates to a 56% payout rate.
Top Glove shares were trading 2.49% or 17 sen higher at RM7.01 per share, valued at RM57.46 billion. 17.45 million shares were traded.
Read also:
Top Glove 1T net profit rises to RM2.38b, declares dividend of 16.5 sen
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