Author: gloveharicut   |   Latest post: Wed, 25 Nov 2020, 7:03 PM


Best yet to come from HARTA after record profit in Q2

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Best yet to come from Hartalega after record profit in Q2

KUALA LUMPUR: Hartalega Holdings Bhd posted bumper profits in the second quarter (Q2) ended September 30 2020 but RHB Research said the best is yet to come for the glove manufacturer.

Hartalega was poised to register higher earnings in Q3 due to higher average selling price (ASP) of rubber gloves, RHB Research analyst Alan Lim said in a report today.

Hartalega's Q2 net profit surged 424.5 per cent to RM544.96 million from RM103.90 million a year ago.

In a Bursa Malaysia filing yesterday, the glove maker said this was due to increase in sales revenue and better production efficiency.

Its Q2 revenue jumped 90.1 per cent to RM1.35 billion from RM709.42 million on the back of higher sales volume and increase in ASP.

Lim said Hartalega's earnings in the first six months had beated analyst's expectations.

The firm has maintained its "buy" call for Hartalega with a target price of RM23.50 per share from RM21.60, representing 28 per cent upside with about 2.0 per cent of yield.

Lim said the glovemaker's expansion plan remains intact, with Plant 6 fully commissioned in October, bringing total capacity to 41 billion pieces per annum.

"Our target price reflects 32 times of FY21 price-earnings-ratio close to its five-year mean of 31 times," he added.

The firm also raised Hartalega's estimated core earnings by 74 per cent-117 per cent for FY21, FY22 and FY23 due to higher ASP assumptions.

"Our ASP assumptions range from US$41 to US$50 and US$47 are conservative compared to the current market price for nitrile gloves at US$100 to US$115 per box."

However, Lim said Hartalega's long-term growth has been lowered to 2.0 per cent (from 4.0 per cent) arising from the competition in the long term due to the high ASP.

"In the short term, third-quarter earnings should improve due to higher ASP," he added.

The biggest risk to its call include safe and effective Covid-19 vaccine available globally faster-than-expected and lower-than-expected sales volume or higher raw material prices.


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