In the show business, people call stars who are good at re-film, TV and song in the three fields as "amphibious stars". In the capital market, Top Glove Group, a glove manufacturer from Malaysia (hereinafter referred to as "Top Glove"), also wants to be addicted to "amphibious stars".

The world's largest glove manufacturer

China International Capital Corporation is the sole sponsor of the top Malaysian glove manufacturer who recently applied to be listed on the main board of the Hong Kong Stock Exchange, according to the Hong Kong Stock Exchange.

Zhitong Financial APP has learned that top gloves have been listed on the Malaysian Stock Exchange and Singapore Stock Exchange since 2001 and 2016 respectively. With regard to seeking listing on the main board of the Hong Kong Stock Exchange, the company directors are of the view that the listing of shares on the Hong Kong Stock Exchange is conducive to creating another platform for shares to be traded through another rare's stock exchange. expand and strengthen the company's investor coverage and its investor base, enhance the liquidity of shares, and provide financing flexibility for future fund-raising.

On the business side, the main products of top gloves are gloves and non-glove products, in which gloves are used for medical purposes (including clinical examinations and surgery) and non-medical uses (including household and food, automotive, manufacturing and retail industries). Accounted for 99.4% of revenue in fiscal year 2020. The company's glove manufacturing plants are located in Malaysia, Thailand, China and Vietnam, with a total installed capacity of 93 billion gloves per year.

According to Frost Sullivan, the company's global market share in 2019 was 12.9%, 10.0% and 10.6%, respectively, in terms of sales revenue, sales and production. In terms of production capacity, the global market share in 2020 was 11.8%, which is about twice that of the second-largest manufacturer in the global glove industry.

As of fiscal year 2020, the largest sales of top gloves were nitrile gloves, with sales of 29.3 billion pairs, accounting for 47.2%. This was followed by natural rubber latex gloves, with sales of 26.1 billion pairs, accounting for 42 per cent of sales.

In addition, non-glove products of top gloves, including disposable three-layer protective masks, condoms, oral care products (including latex and non-latex dental rubber barriers), latex tourniquet, rubber elastic belt, latex mat, antibacterial bowl plate cleaner and floor cleaner, etc.

The demand of the industry is improving, and it is time to increase production capacity.

On the performance side, top glove revenue grew 13.8 per cent from 4.221 billion ringgit in fiscal 2018 to 4.8 billion ringgit in fiscal 2019, and a further growth of 50.7 per cent to 7.237 billion ringgit in 2020. Gross profit increased by 4.9% from 842 million ringgit in fiscal 2018 to 884 million ringgit in fiscal 2019, and further increased by 222.4% to 2.85 billion ringgit in fiscal 2020. Gross profit margin fell from 20.0% in fiscal year 2018 to 18.4% in fiscal year 2019, and then increased to 39.4% in fiscal year 2020.

For the three months ended November 30, 2020, the company's revenue and gross profit were 4.758 billion ringgit and 3.445 billion ringgit respectively, an increase of 293.5% and 1342.8% respectively over the same period last year. Gross profit margin increased from 19.7% for the three months ended November 30, 2019 to 72.4% for the three months ended November 30, 2020. According to the prospectus, the strong performance during the period was due to unprecedented demand for gloves during public health events.

Due to the improvement of the company's product demand due to public health events, top gloves expect to continue to expand production capacity to seize the opportunity of market increment. Top Glove said in its prospectus that some of the funds raised in the listing would be used to expand production capacity and develop digital manufacturing systems. In fiscal year 2019, the average utilization of the company's production facilities was 84%. Due to growing demand, the average utilization rate of production facilities reached 88 per cent in fiscal year 2020. The company expects the demand for its glove products to continue to rise, so it plans to add 333 dual-mold production lines, with an annual production capacity of 193 billion gloves by the end of 2025.

Zhitong Financial APP notes that global gloves are growing moderately until 2020. Sales and sales increased from 385.9 billion and $6.589 billion in 2015 to 529 billion and $8.746 billion in 2019, respectively, representing a compound annual growth rate of 8.2 per cent and 7.3 per cent. Sales and revenue in the glove industry are expected to reach 1.2851 trillion and $24.9 billion in 2025, with compound annual growth rates of 15.9 per cent and 19.1 per cent from 2019 to 2025, respectively.

It is worth noting that global glove sales will maintain a rapid growth trend in the next five years, but prices will not remain high for a long time. Frost Sullivan expects the price per thousand gloves to fall back quickly to $33.50 per thousand in 2022 after reaching a high of $52.9 in 2020, and the downward trend will continue for a long time.

In the long run, the downward trend in glove prices may be caused by increased global glove production capacity, increased superimposed competition and other reasons. According to the top glove prospectus, there are about 150 to 200 rubber glove manufacturers worldwide, of which about 50 to 60 are located in Malaysia, including three of the top five rubber glove manufacturers by 2019 by revenue. The company mainly through competitive prices to continue to provide high-quality products and services in a timely manner to retain existing customers and enhance customer loyalty.

If a price war is inevitable, 2021 could be the best year for top gloves in recent years. If the top glove goes on sale in 2021 as desired, it will take time to see whether this "listing is the peak" vote will move the "stomach" of investors.