KUALA LUMPUR (June 17): The 5% sales and service tax (SST) on latex will likely put a squeeze on Malaysian glove makers' profit margins and further undermine their competitiveness on a global scale, according to Apex Securities.
“This comes at a time when the industry is already grappling with a challenging operating landscape, including persistent pressure from US tariffs,” said the firm in a research note on Tuesday.
Imported natural rubber latex and nitrile butadiene rubber latex are subject to the sales tax under the PU(A) 170/2025 order, which would be implemented on July 1.
As such, Apex Securities has lowered its earnings forecasts and target prices for established local glove makers such as Hartalega Holdings Bhd (KL:HARTA) and Top Glove Corporation Bhd (KL:TOPGLOV).
The firm noted that the implementation of the 5% sales tax would raise Hartalega's total cost by 1.5%, therefore lowering the company’s earnings forecasts by 1.5% for the financial year ending March 31, 2026 (FY2026), down 4% for FY2027, and 3.7% lower for FY2028, along with a lower target price of RM1.76.
Additionally, Top Glove may face a core net loss of RM6.1 million for the financial year ending Aug 31, 2025 (FY2025), RM52.1 million for FY2026, and RM51.9 million for FY2027, as the group’s production costs could rise up to 2%. Apex Securities also lowered the company's target price to 78 sen.
“Given the ongoing trade and policy uncertainties affecting Malaysian glove makers, we maintain our ‘neutral’ stance on the sector,” said Apex Securities.
It also cited that headwinds will also come from lower demand from US markets and an oversupply of raw materials in Vietnam and Indonesia by Chinese manufacturers.
The 5% SST on raw latex materials has been granted a grace period through Dec 31, 2025 by the Royal Malaysian Customs Department as glove makers have ongoing negotiations with the government, according to Apex Securities.
The research house echoed the Malaysian Rubber Glove Manufacturers Association’s (Margma) sentiment to postpone the implementation date to allow for comprehensive impact assessments and call for the exemption of critical raw materials.
When contacted by The Edge, Margma said it is currently seeking clarity on the grace period.