13-05-2025
Stiff competition to affect Hartalega's prospects
RHB Research noted signs of order book recovery, with May orders rising to 2.3 billion piece.
PETALING JAYA: Despite a strong earnings rebound for its financial year ended March 31, 2025 (FY25), Hartalega Holdings Bhd 's prospects remain clouded by intense competition and a prolonged industry recovery, say analysts.
While the glove maker's fundamentals have improved, research houses warned that structural oversupply, volatile foreign exchange trends and geopolitical factors could temper further upside in the near term.
TA Research noted that Hartalega's FY25 results – which saw net profit surge to RM74.54mil from RM12.5mil in FY24 – were encouraging, but earnings momentum may flatten in the coming quarters.
'We reduce our FY26-FY27 earnings projections to RM68.5mil and RM107.4mil (previously: RM140.2mil and RM191.3mil), respectively, after lowering the sales volumes by 8% and 10.9% and incorporating FY25 numbers into our model,' the brokerage said.
It added that sales volumes were expected to remain flat in the first quarter of FY26 (1Q26), with utilisation rates hovering between 60% and 70%, while average selling prices (ASP) could fall by around 5% quarter-on-quarter (q-o-q) due to lower raw material costs.
RHB Research highlighted Hartalega's current valuation as attractive, trading below historical means.
'Hartalega is currently trading at 1.65 times 2025 price-to-book-value (P/BV), which is below its three-year historical mean of 1.8 times,' it said.
RHB Research noted signs of order book recovery, with May orders rising to 2.3 billion pieces, and guided volume for 1Q26 expected to reach up to 6.5 billion pieces – indicating a 6% q-o-q growth.
Still, RHB Research trimmed its target price to RM2.83 from RM3.30, factoring in foreign exchange adjustments and concerns over 'the higher risk associated with easing trade tensions between China and the United States'.
The research house maintained its 'buy' call on Hartalega.
Hong Leong Investment Bank (HLIB) Research said: 'Hartalega shared a cautious outlook, indicating that the industry's supply-demand equilibrium could be delayed from the previously projected 2026 timeline.'
However, HLIB Research acknowledged that the United States' 145% tariff on Chinese vinyl gloves could eventually benefit Malaysian nitrile glove makers by shifting demand as nitrile gloves become more price-competitive.
