Top Glove downgraded despite Q3 profit surging 133%
Top Glove Corp Bhd’s Q3 results exceeded expectations, with its net profit jumping 133% to RM80.99 million. (Reuters pic)
PETALING JAYA: Research analysts have downgraded Top Glove Corp Bhd despite the world’s largest rubber glove maker more than doubling its net profit in the third quarter.
The research houses pointed out its earnings have likely peaked as sales volume and product prices are moderating amid the easing geopolitical conflict in the Middle East.
The consensus among analysts appears to have turned cautious as “sell” and “hold” outnumber “buy” calls, according to research houses tracked by Bloomberg.
In an exchange filing yesterday, Top Glove announced its net profit for the third quarter ended May 31, 2026 (Q3 FY2026) rose 133.1% to RM80.99 million from RM34.75 million a year ago. Quarterly revenue increased 31.9% to RM1.1 billion from RM830.25 million.
For the first nine months ended May 31, 2026, net profit more than doubled to RM150.33 million from RM70.50 million a year earlier, while revenue rose 14.8% to RM2.98 billion from RM2.6 billion.
Top Glove’s Q3 results exceeded expectations, driven mainly by higher-than-expected sales volume and profit margins following supply disruption of raw materials due to the conflict in the Middle East.
Most analysts do not expect this to last given that the US and Iran have struck a tentative deal to end the Middle East war.
Since the start of the war on Feb 28, Top Glove had risen as much as 52% and is still up about 24% at current prices.
However, the stock has fallen four trading sessions in a row, dropping by about 13% over that period. The stock closed unchanged at 72 sen today, with 85 million shares traded, valuing the group at RM5.91 billion.
Public Investment Bank (PublicInvest) downgraded Top Glove to “underperform”, with a revised target price (TP) of 59 sen per share from 58 sen previously.
“We believe the current valuation implies peak earnings rather than normalised profitability, with limited re-rating catalysts from here.
“We revise up our FY2026F earnings forecasts by 91.8% to factor in higher Q3 FY2026 revenue. However, we cut our FY2027-28 forecasts by an average 15.4% as we expect the oversupply condition to persist,” it said in a note today.
PublicInvest noted that monthly average selling prices (ASPs) peaked in May before moderating in June as raw material conditions normalised. It expects revenue and earnings growth to moderate moving forward, limiting further pricing-led upside.
“In addition, we expect higher input cost pressure from the second half of FY2026 onwards, with Malaysia’s gas tariff expected to increase 40% from October 2026,” it added.
Strong earnings not sustainable
In downgrading its recommendation to “reduce’ from “hold”, CIMB Securities stated it believes Top Glove’s recent strong earnings are “unsustainable”.
RHB Research, which maintained its “sell” call with a TP of 65 sen, said the key question remains whether Top Glove’s current margins are sustainable.
Noting that the management is confident of maintaining 15% Ebitda (profit) margins for the remainder of FY2026, it however sees risks of disappointment from aggressive pricing by China producers and a potential slowdown in demand.
Top Glove was founded by its executive chairman Lim Wee Chai, 67, and his wife Tong Siew Bee in 1991, and within a decade transformed it into one of the world’s largest producers of rubber gloves.
It also has manufacturing operations in Thailand and Vietnam, with its 51 factories having a total production capacity of 95 billion gloves annually and exporting to over 195 countries.
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