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HARTA (5168) HARTALEGA HOLDINGS BHD may see weaker 3Q22 earnings

KUALA LUMPUR: Hartalega Holdings Bhd’s earnings in the third quarter ended Dec 31, 2021 (3Q22) is expected to be weaker on a quarter-on-quarter (QoQ) basis, according to AmInvestment Bank Research.

Hartalega is expected to release its 3Q22 earnings in the first half of February.

“Due to the ongoing trend of lower average selling prices (ASP) for gloves, we expect 3QFY22 earnings to be weaker QoQ.

“However, its balance sheet should remain strong with a solid net cash position,” AmInvestment said in a report.

The research house has maintained its “hold” call on Hartalega Holdings Bhd with an unchanged fair value of RM6.

“We have imputed a 3% premium for an ESG rating of four stars. Our valuation is based on a PER of 18x FY23F,” it said.

“We believe that the upside is capped as the ASP downtrend continues. Having said that, the downside is also limited as its share price has fallen to around the pre-pandemic level of RM5.92, which was last recorded on Jan 31, 2020,” AmInvestment said.

The research house made no changes to its FY22F, FY23F and FY24F earnings estimates of RM4.15bil, RM1.11bil and RM904mil respectively.

AmInvestment noted that Hartalega was currently expanding its Plant 7 although the speed of expansion had slowed down.

As of end-September 2021, Hartalega has commissioned 8 out of 10 lines in Plant 7. This has increased its total capacity to 44 billion pieces per annum.

On its utilisation rate, AmInvestment expects it to be in the range of 60–70% in view of the high supply that has been entering the market in the past one year.

“On the positive side, this also means that there is no shortage of foreign workers in the next 6–12 months for the company,” it added.

Despite the surge of Covid-19 cases globally due to the Omicron variant, it noted that said the ASP for gloves was still on a downtrend as the market had been flooded with a high supply of gloves in 2021.


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