CIMB Research expects stronger prospects for the company from 2H25 onwards, mainly backed by an expected surge in glove demand from the United States clients.
PETALING JAYA: Hartalega
Bhd is poised to benefit from increases in sales volume and average selling prices (ASPs) thanks to higher US tariffs on China-imported medical gloves from 2025 onwards.
These positive factors will support the glove maker to post stronger results in the second half of financial year 2025 (2H25), CIMB Research said in a report yesterday.
Hartalega recently reported 1H25 core net profit of RM45.3mil, which fell short of the research house’s 23.5% expectations and 27.6% of Bloomberg consensus for financial year 2025 (FY25) estimates.
“We are expecting stronger prospects from 2H25 onwards, mainly backed by an expected surge in glove demand from the United States clients.
“This is driven by higher tariffs on China-imported medical gloves to the United States starting in January next year (rising to 50% from 7.5% currently), with a further increase to 100% from January 2026 onwards,” CIMB Research noted.
As at 1H25, 56.7% of Hartalega’s sales were derived from clients in the North America region.
Within the glove sector, the research house said “We like Hartalega as the key beneficiary of the higher US tariffs on China-imported gloves from 2025 onwards, significant exposure to the United States market among glove stocks under coverage and that it boasts the highest profit margins among its peers.”
Operational-wise, Hartalega successfully commissioned 10 new production lines (out of 24 lines across both plants) in November, bringing its total annual production capacity to 37 billion pieces.
The group also expects the impact of the increase in the minimum wage from January 2025 to be minimal at 2% to 3% of its ASPs.
“We believe that Hartalega will be able to pass on this impact with the ongoing ASP hikes. We gather that Hartalega currently has a headcount of 8,000 employees, of which an estimated 63% are foreign workers,” added CIMB Research.
Hong Leong Investment Bank Research (HLIB) Research in a note to clients said “Valuation needs more earnings to support Hartalega reported 1H25 core profit after tax and minority interest of RM33mil, which came in below our 15% and 20% consensus FY25 forecasts.”
Globally, the brokerage firm expects glove demand-supply dynamics to reach an equilibrium in 2025 (for example, the global plant utilisation rate will hit around 85%).
Going into the third quarter of next year (3Q25), HLIB Research said Hartalega targets to deliver at least 2.3 to 2.5 billion pieces per month.
Given the group’s forecasted plant utilisation rate to hit 81% based on installed annual capacity of 37 billion, the research house said “we believe there could be further ramp-ups of production lines in 3Q25, implying that additional ramp-up costs will be incurred.”
In terms of group blended ASP, Hartalega indicated that it will increase by about US$1 to US$2 per 1,000 pieces in 3Q25.
HLIB Research has cut Hartalega’s FY25, FY26 and FY27 forecasts by 15%, 9% and 6%, respectively, mainly reflecting the losses in 2Q25 and higher cost structure assumptions.
The brokerage has also downgraded the stock to a “hold” with a lower target price of RM3.32.
