China Securities Co., Ltd.: Geopolitical conflicts drive the turning point of the cycle, disposable gloves usher in a new stage of price repair.

China Securities Co., Ltd. released a research report stating that the disposable glove industry will enter a phase of price and profit recovery in 2024. In 2026, the Middle East geopolitical conflict led to a sharp increase in crude oil prices, causing raw material and energy prices in the glove industry to rise, potentially accelerating the process of industry profit recovery. Recently, the stock prices of relevant companies have risen sharply, and the company believes that this is due to the impact of the Middle East geopolitical conflict on the supply side, as well as the difference in expectations for glove prices, profits, and their sustainability. China is one of the major exporters of disposable gloves globally, with leading companies having cost advantages and global layout capabilities, leading to greater profit elasticity. The main points of China Securities Co., Ltd. are as follows: The disposable glove industry has a certain cyclical nature, with a recovery starting in 2024. From an investment research framework perspective, changes in supply and demand leading to price fluctuations can bring investment opportunities, with manufacturers having cost advantages experiencing more significant profit releases. Nitrile gloves have good performance and are the fastest-growing type of disposable gloves. During the global public health crisis in 2020-2021, there was a shortage of gloves, with nitrile glove prices reaching as high as $150 per box, leading to Intco Medical Technology's stock price increasing by over 10 times. In 2022-2023, the global glove industry experienced destocking downstream and clearance of small and medium-sized production capacity upstream, resulting in rapid price declines, with nitrile glove prices dropping to around $14 per box. In 2024-2025, glove prices stabilized and rose again, entering a phase of profit recovery for the industry. China is one of the major exporters of disposable gloves globally, with its low-cost advantage becoming the core competitive strength for increasing market share. During the global public health crisis in 2020-2021, some Chinese glove companies underwent upgrades in systems to achieve "shorter construction periods, higher line speeds, lower energy consumption, and stronger supply chain collaboration," making China one of the major exporters of gloves globally. On January 1, 2025, the U.S. significantly increased tariffs on Chinese medical-grade nitrile gloves, offsetting the cost advantages of Chinese companies compared to Southeast Asian companies. The global glove market was subsequently divided into two regions: 1) non-U.S. markets, mainly supplied by Chinese production areas, where several domestic leading companies maintained market competitiveness with better production efficiency, achieving full production and sales; 2) the U.S. market, mainly supplied by Southeast Asian manufacturers, with local glove companies steadily increasing their production capacity utilization rate. Tariffs did not change the increasing demand trend in the glove industry, which is still in the process of profit recovery. Domestic leading manufacturers, benefiting from cost advantages, are expected to continue increasing their global market share. Recent Middle East geopolitical conflicts triggering price hike logic have accelerated the industry into a profit recovery period. Recently, the stock prices of relevant companies have risen sharply, with the company believing that this is due to the impact of the Middle East geopolitical conflict on the supply and demand sides, as well as the difference in expectations for glove prices, profit margins, and their sustainability. 1) War leading to an increase in oil prices may cause some upstream manufacturers to reduce production and increase prices, which in turn could lead to some nitrile glove manufacturers reducing production and increasing prices; 2) considering the shipping cycle, concerns about price hikes and reduced supply, some downstream customers may increase short-term purchases; 3) price increases are not just following the trend, but an opportunity for the glove industry to increase prices, potentially improving profit levels; 4) even if the short-term resolution of the Middle East geopolitical conflict occurs, it will take some time for oil supply to recover and downstream refining capacity to recover. It is recommended to continue monitoring the development trends of Middle East geopolitical conflicts and their impact on industry supply, demand, and price trends. Companies in the disposable glove industry include: 1) Intco Medical Technology: A global leader focusing on the glove business, with the potential for continued market share growth and significant profit elasticity due to relatively low production costs. 2) Blue Sail Medical: Following a turnaround in the glove business, there is potential for significant profit elasticity, with the cardiovascular business being driven domestically and internationally for steady development. 3) Zhonghong Pulin Medical Products: One of the leading domestic nitrile glove companies, actively expanding overseas markets and exploring new growth areas such as life support services. Investment recommendations: For companies focusing on the glove industry, it is recommended to pay attention to leading companies with cost advantages and global layout capabilities, which will have greater development opportunities and profit elasticity. For companies actively expanding into new businesses to build new growth curves to counter the cyclical fluctuations of the glove industry, there is also potential for substantial improvement in profits. Risk factors: Uncertainty in geopolitical conflicts and fluctuations in oil prices, risks of drastic fluctuations in raw material prices, increased market competition risks, risks related to international trade environment and policies, risks of currency fluctuations, risks related to product quality and safety compliance, risks related to technological iterations and substitutes, and risks of end demand falling short of expectations.