The global glove shortage has worsened as Covid-19 cases in the US surged 24 per cent so far this month, according to RHB Research.
Hence, the firm raised its earnings estimates and target price of several glove manufacturers under its coverage including Comfort Gloves Bhd.
RHB Research raised Comfort Gloves’ financial years 2021-2023 earnings forecasts by 49-75 per cent.
In the short term, it said, Comfort Gloves’ second quarter of FY21 core earnings should show significant quarter-on-quarter improvement as average selling price (ASP) was on an increasing trend.
“Post Covid-19, the company’s earnings growth outlook remains positive, as we expect glove demand to continue its annual 8.0-10.0 per cent growth due to higher hygiene awareness globally,” RHB Research said in a report today.
The firm said Covid-19 cases in the US had increased beyond expectations.
As a result, it estimated that glove demand had increased in the US, causing further depletion in global stock levels.
“Our estimates show that global stock levels could have declined by an additional two per cent to 10.8 billion pieces. This is enough for 15 days of demand (previously 15.2 days) and much lower than the prepandemic 60-day average,” it added.
From July 8-12, the number of new cases rose to above 60,000 per day.
As of July 12, the total new cases increased by 367,000 or 24 per cent on a month-to-date basis to 3.27 million.
“As Covid-19 cases remain high in the US, demand for gloves should stay exceptionally strong, given its importance in protecting healthcare workers.
“As the US is the world’s biggest glove consumer, its stubbornly high number of cases means that demand for gloves should continue to rise,” RHB Research said.
The firm upgraded Comfort Gloves to a “buy” from “neutral” with new target price of RM4.80 from RM3.18 previously.
RHB Research expects the company to add six production lines in FY21.
Upon completion, its production capacity will increase by 14 per cent to 5.9 billion pieces per annum.
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