Malaysian glove makers poised for margin recovery in 2026

KUCHING (Jan 19): Malaysian glove manufacturers are expected to see further improvements in margins and earnings in 2026 supported by a stronger cost structure and gradual recovery in sales volumes.

Kenanga Investment Bank Bhd (Kenanga Research) in a sector update on Thursday said glove makes under its coverage have posted steady earnings before interest, tax, depreciation, and amortisation (EBITDA) margin expansion over their past quarters, which indicates improving operational efficiency.

For instance, Top Glove Corp Bhd (Top Glove) said its EBITDA margin rise from 10 per cent in 4QFY25 to 14 per cent in 1QFY26. Kossan Rubber Industries Bhd (Korean) recorded EBITDA margins of 11 and 14 per cnet from 4QFY24 to 3QFY25.

“We believe the gradual margins and volume sales improvement are expected to dispel earlier concerns of Malaysian glove makers’ less-than-robust cost structure leading to margins being crimped which constrained overall profitability,” it said.

In the near term, Malaysian glove producers may also benefit from regional supply disruptions, based on its channel checks that revealed production issues at a Chinese glove maker’s plant in Indonesia, leading to commercial output delay to the end of first quarter of 2026.

Furthermore, valuations across the sector remain depressed. The house noted that Malaysian glove stocks are trading close to trough levels of the previous downcycle, at about two standard deviations below their historical one-year forward average.

“While earnings are only showing early signs of recovery, longer-term upside remains supported by structural demand and ongoing supply rationalisation,” it said.

Over the medium term, glove makers are expected to prioritise automation, operational efficiency and product differentiation to cope with intense competition and rising operating costs.

It said more disciplined players are also reducing reliance on foreign labour through greater plant automation, such as Hartalega Holdings Bhd’s (Hartalega) ongoing digitalisation initiatives across its operations that is expected to improve production yield in 2026 and reduce manual manpower from around 7,500 to 7,000 workers.

It believes Kossan is likely to be the least affected by potential order slowdowns, given its focus on higher-margin specialty gloves and its relatively disciplined cost management.

Kenanga Research continues to favour Top Glove, noting its growing presence in the United States, where sales now account for 33 per cent of total volume, up from 18 per cent three quarters ago.

The group is targeting the US to contribute 40 per cent of total volume over the next two years. In addition, cost-saving measures implemented over the past two years have reduced costs by 20 per cent, lifting EBITDA margin to 14 per cent in 1QFY26 from 10 per cent a year earlier.

However, performance in the US market remains uneven among Malaysian glove makers. While Top Glove is gaining market share, Hartalega continues to face intense competition.

Hartalega’s North American revenue declined by 17 per cent, 11 per cent and 25 per cent in 2QFY26, 1QFY26 and 4QFY25, respectively, prompting the house to cut its FY27 net profit forecast by 30 per cent.