Analyst Slightly Positive on STGT due to Secured US Orders, Affirming OP Rating/TP at ฿91

The U.S. Customs yesterday placed a detention order on imports of products made by subsidiaries of the world’s number one rubber glove producer, Top Glove, an action taken against firms suspected of using forced labor.

 

KGI Securities had a slight positive view for Sri Trang Gloves Public Company Limited (STGT) on the event as North America was the third largest source of revenue for STGT (17% of its 1Q20 top line). Amidst rising demand for rubber gloves globally, it is likely that there may be orders diverted from Top Glove to STGT, which is one of the world’s leading glove producers. However, KGI believed that the impact to STGT’s bottom line would not be significant since STGT has already secured advanced orders for its products (around 90%-95%), so there is only a small amount reserved for spot orders.

 

In this regard, KGI maintained its view that its sales revenue will gradually ramp up throughout this year due to high demand for rubber gloves and also maintained a rating of Outperform on the counter with a 2021F target price of Bt91.00.

Nevertheless, KGI pointed out that lower-than-expected demand boost from the COVID-19 outbreak, lower-than-expected average selling price (ASP), and higher-than-expected raw material prices could post as downside risks for STGT.