KUALA LUMPUR – Supermax Corp Bhd is expected to continue facing a challenging and competitive business landscape ahead due to elevated costs, subdued selling prices, and massive capacity leading to suppressed plant utilisation, said Kenanga Research.
“With no reversal of fortunes in sight, we maintain our financial year 2024 net loss forecast, target price of 70 sen, and ‘underperform’ call for the group,” it said in a note today.
Moreover, the research house foresees the rubber gloves industry’s overcapacity situation to persist for at least the next two years.
“Based on our estimates, the demand-supply situation will only start to head towards equilibrium in 2025 when there is virtually no more new capacity coming onstream, while the global demand for gloves continues to rise by 15% per annum underpinned by rising hygiene awareness,” it said.
Still, Kenanga Research noted that capacity is seen to expand further in 2023, thus projecting the demand for gloves to rise by 15% in 2023.
“However, this will do little to ease the overcapacity situation as the global glove production capacity will grow by 16% to 595 billion pieces during the year as more capacity planned by incumbent and new players during the pandemic years finally comes online,” it said.
Kenanga Research said this would result in the excess glove capacity rising by 22% to 137 billion pieces from 112 billion pieces in 2022.
“The expanded overcapacity means low prices and depressed plant utilisation will likely persist in 2023,” it said.
Kenanga Research added that not helping the already dire situation was the reluctance of customers to commit to sizable orders and hold substantial stocks on expectations of further decline in prices.
Supermax Corp posted a net loss of RM39.92 million for the third quarter ended March 31, 2023 from a net profit of RM13.01 million registered in the same quarter last year. – Bernama, May 19, 2023
.jpeg)
