MARK - Embarking on New Era

KBVS Update
Wednesday, 26 June 2024

MARK - Embarking on New Era
(Initiate BUY - TP: IDR1,250)

In 2024, the global demand is expected to offset the industry supply due to inventory cuts driven by growing medical needs from ageing populations and increased surgeries. Grand View Research projects an 8.4% annual growth in global demand for gloves through 2030, while the Malaysian Rubber Glove Association anticipates a supply shortage in 2024.

Winner in both scenarios. North America led the global disposable gloves market in 2023 with a 37% revenue share. The upcoming U.S. tariff hikes on Chinese products will significantly impact the industry, with tariffs on medical and surgical rubber gloves increasing from 7.5% to 25% by 2026. This is expected to boost MARK's market position. Two scenarios are likely: Chinese companies may move production to countries like Vietnam and Indonesia, or demand from Malaysia and Thailand might rise, both potentially increasing MARK's sales and market share.

Expect earnings to grow at a CAGR of 14.8% from 2024-30. Assuming conservative glove former volume growth of 7.3% annually (below industry growth rate of 8.4%), we expect MARK to generate strong earnings growth with a 14.8% CAGR from 2024-30.

We initiate coverage on MARK with a BUY recommendation and a TP of IDR1,250, using DCF-based TP with WACC of 11.5% and LTG of 3%. Our TP implies 16.3x ‘24F PE, which is slightly above 5-year mean P/E.  

Regards,
Benyamin Mikael -KBVS Research