MIDF Amanah Investment Bank Bhd (MIDF Research) has upgraded Top Glove Corporation Bhd to NEUTRAL from SELL, revising its target price to RM1.24 from 82 sen. The research house pointed to narrowing losses in the first quarter of the financial year 2025 (1QFY25) as a sign of improving fundamentals, though the house expects the recovery to lag behind its peers.

Top Glove reported a normalised loss of RM4.9 million in 1QFY25, a significant improvement from the RM23.9 million loss in the previous quarter. This performance was attributed to a 16% quarter-on-quarter increase in sales volume, leading to a better utilisation rate of 66% and higher average selling prices for nitrile gloves.

Despite the improvement, analysts noted that Top Glove's pace of recovery remains slower than that of its competitors, many of whom have already returned to profitability. Elevated production costs continue to weigh on earnings recovery, although better utilisation rates and higher orders from the US market are expected to provide some relief in the coming quarters.

MIDF Research maintained its earnings estimates for Top Glove but increased its price-to-book value target to 1.5 times, reflecting improved fundamentals.

While the research house anticipates profitability from 2QFY25 onwards, it believes the impact of the US tariff hike on Chinese glove manufacturers will be limited for Top Glove due to its well-diversified revenue base. Nonetheless, continuous stock replenishment and increased demand for nitrile gloves will support improved margins in the coming quarters.

At the close of trading on Dec 20, 2024, Top Glove's share price stood at RM1.32, implying a potential downside of 6%.