KUALA LUMPUR (Oct 24): Chinese glove manufacturers setting up production outside China to avoid US tariffs could expand global supply and further delay market equilibrium and margin recovery, CGS International warned.

New capacities from these producers could increase global glove supply by about 17.2%, or 84 billion pieces, by 2027, the research house said.

“Malaysian glove producers’ Ebit (earnings before interest and taxes) margins are unlikely to recover to pre-Covid-19 levels until at least 2028,” CGS International said in a note on Friday.

The research house reiterated its “underweight” call on Malaysian glove makers, noting that the combination of excess supply and higher fixed costs — particularly for labour and energy — has eroded Malaysia’s position as a global cost leader.

It also trimmed its sector core net profit forecasts by 12% for financial year 2025 (FY2025), and 11% each for FY2026 and FY2027.

CGS International rated Hartalega Holdings Bhd (KL:HARTA) as its top sell, saying the counter remains the most expensive glove manufacturer under its coverage.

Hartalega trades at 23 times calendar year 2027 (CY2027) price-earnings while generating the lowest return on equity and operating with the highest cost structure among local peers, it said.

Poor results and a weak outlook from Hartalega in November 2025 could further weigh on its share price and valuations, the research house added.

However, it noted that key upside risks include a renewed global pandemic driving demand, faster removal of older capacity, a weaker ringgit, and changes in global tariff structures.