KUALA LUMPUR – MIDF Research has maintained its ‘buy’ call on Hartalega Holdings Bhd with a revised target price (TP) of RM8.03 from RM8.40 previously after the company announced its first half results ended September 30, 2021 (1HFY2022).
Hartalega’s 1HFY22 net profit grew 315% year-on-year (y-o-y) to RM3.27 billion, predominantly due to higher sales volume and average selling prices (ASP), even though this was offset by higher raw material costs.
It said the second quarter (2QFY2022) net profit decreased 59.5% quarter-on-quarter (q-o-q) to RM914 million and compared to the previous quarter, revenue decreased by 48.5% q-o-q to RM2.01 billion due to a decrease of 27% q-o-q in ASP compared to 1QFY2022.
Even with all the positive outlook, Hartalega is likely to be one of the few companies hit the hardest by Cukai Makmur which was estimated to cost the company additional RM639.2 million in our earnings estimates for FY2022.
“However, the loss in earnings is forecast to be slightly mitigated by the stabilisation of nitrile rubber glove ASP in coming months,” it said in a note today.
Meanwhile, Public Investment Bank Bhd (PIVB) maintains its neutral call on Hartalega Holdings Bhd, given the limited price upside.
Hartalega’s performance is still deemed in line with its projections, PIVB said, adding that, however, it expects weaker quarters ahead, reflecting the effects of a lower utilisation rate and softening ASPs.
“We lower our forecasts for FY2022 to 2024 by 1.0 to 24% on account of these, and to also account for the recently-proposed Cukai Makmur in Budget 2022,” it noted.
On the outlook, PIVB said over the longer term, the glove industry is expected to undergo a structural step-up in demand.
“Post-pandemic glove usage is expected to increase notably from emerging markets with low glove consumption per capita, amid heightened hygiene awareness,” it said.
As at 10.47 am, Hartalega rose three sen to RM5.78, with 2.82 million shares traded. – Bernama, November 3, 2021
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