Phillip Research expects Hartalega to deliver stronger earnings quarter-on-quarter for 1Q25.
PETALING JAYA: Higher plant utilisation supported by increased sales orders from sustained inventory replenishment by customers is expected to push Hartalega Holdings Bhd
earnings higher for its first quarter 2025 (1Q25) ended June 30.
The group’s performance will also be aided by stronger margins from the easing of raw-material prices and a hike in average selling prices (ASP).
Phillip Research expects Hartalega to deliver stronger earnings quarter-on-quarter (q-o-q) for 1Q25.
The research house estimates net profit to come in at RM45mil to RM55mil (4Q24: RM14mil), representing 20% to 25% of its FY25 core net profit forecast.
Hartalega’s financial results are expected to be released on Aug 6 and the research house did not make changes to its earnings forecast for the glove maker.
It reiterated its “buy’’ call on Hartalega with an unchanged target price of RM4.10 a share, based on an unchanged price-earnings ratio multiple of 32 times on FY26 earnings per share.
Phillip Research said it continues to like Hartalega for its solid execution track record, superior cost structure, and healthy balance sheet backed by a high net cash level and the expected imposition of tariffs on Chinese glove makers by the United States in 2026.
The key downside risks to its call include weaker-than-expected sales volumes.
The research house added Hartalega is currently operating at a 75% to 80% plant-utilisation rate attributable to higher sales orders averaging two billion pieces per month (4Q24: 1.8 billion).
The research house expects the trend of higher ASPs to continue due to cost pass-throughs to its customers, with a 5% increase in ASPs.
Hartalega’s lead time has increased to two to three months on higher customer orders.
As a result, the company will be recommissioning manufacturing facilities with capacity of about four billion pieces, which will increase its annual production capacity to about 36 billion pieces by end-FY25.
This is expected to help reduce current lead times compared with Chinese glove makers, whose lead times range from three to six months.
Hartalega would have recommissioned most of its idle lines, bringing production levels back to about 90% of its peak capacity, Phillip Capital said.
