KUALA LUMPUR (June 7): Maybank Investment Bank (Maybank IB) has maintained its 'buy' rating for Hartalega Holdings Bhd (KL:HARTA) at RM3.19, with an unchanged target price (TP) of RM4.50, saying the average selling price (ASP) outlook is improving for the glove maker, as it fully passes on higher raw material costs to customers.

In a note on Friday, the research house said ASPs could improve further if demand surges, due to tight supply.

“Hartalega’s order lead time has now increased to two to three months, versus Chinese glove makers’ three to six months. We maintain our earnings forecasts and TP of RM4.50, on 3.2 times price-to-book ratio for the financial year ending March 31, 2026 (FY2026),” Maybank IB said.

Maybank IB expects raw material costs to start trending down, following the wintering season of natural rubber from May 2024.

With stable ASPs, lower raw material costs (to be reflected in the results for the second quarter ending Sept 30, 2024 or 2QFY2025) and better cost efficiency post decommissioning of the Bestari Jaya facilities, as well as the absence of additional operating costs from the relocation of production lines to the Next Generation Complex, Hartalega should be able to report stronger earnings performance for the coming quarters, according to Maybank IB.

The research house said that the worst is over, and the glove sector is poised to recover from a nearly three-year downturn.

“We continue to like Hartalega for its hands-on management, proven track record in technology and product quality, and strong balance sheet (with net cash of 40 sen per share).

“We peg Hartalega’s valuation to its historical price-to-book value mean of 3.2 times. In our view, this methodology is useful for evaluating turnaround sectors/stocks,” Maybank IB said.

At the time of writing on Friday, Hartalega had risen 5.02% or 16 sen to RM3.35, with 3.81 million shares done. 

https://www.theedgemarkets.com/node/714531