KUALA LUMPUR: While the US Customs and Border Protection's (CBPS) withdrawal of the import ban on Top Glove Corp Bhd is expected to ease downside pressure on the glove maker, its earnings prospects remain on a slide amid ongoing headwinds.

       On Friday, the group announced in a filing with Bursa Malaysia that the CBP had allowed the resumption of its exports to the US following an import ban on the glove maker on findings of labour rights abuses in July last year.

       Disposable gloves made by Top Glove would be admissible at all US ports of entry, effective Friday, it said.

       The ban impacted Top Glove's sales to the North American market, which according to TA Securities Research, plummeted to just 8% of overall sales in 3QFY21 as compared to 23% in 2QFY21.

       With sales figures expected to rebound following the greenlight from the US CBP, the brokerage noted that it may also slow the decline in the group's ASP given that ASP for the US market is 5% to 8% higher than in other countries.

       However, the downward trend in the group's product selling prices is expected to continue.

       According to TA Securities, Top Glove's ASP is under pressure with average nitrile and latex glove ASPs projected to fall about 8% month-on-month in September from about US$48 and US$38/1,000 pieces in August.

       "As such, we believe that ASP and margins will likely normalize by 1H22.

       "Overall, we cut our FY21/FY22/FY23 blended ASP to USD63.8/31.8/26.3 (previously USD65.7/37.0/28.0) per 1,000 gloves due to the faster than expected drop in ASP," it said in a note.

       TA Securities also noted that the normalising ASP has resulted in Top Glove delaying its expansion plans and reducing its capacity targets by an average of 14%.

       For 2021-2024, the glove maker reduced its projected capacity to 100-174 billion gloves from the previous target of 111-205 billion.

       Meanwhile, the brokerage expects Top Glove's utilisation rates to remain at 70% owing to lower lead times and the need to run Covid tests on employees every two weeks to comply with the new SOP.

       This is despite the company having met the government's requirement of 80% to 100% fully vaccinated workers to operate at 100% capacity.

       TA Securities reiterated its "hold" call on the stock but reduced its earnings forecasts and target price on Top Glove to RM3.22 a share from the previous RM4 a share.

       The target price is based on a higher price-earnings multiple of 18x 2023 earnings per share, up from 17x previously due to the revocation of the withhold release order by the CPB.