08 May 2021

What is the 'Target Price' given for Hartalega by various research houses? (May 2021)

All the glove counters in Malaysia were bashed down to their lows recently, but renewed interest resurface again amid resurgence of Covid-19 cases worldwide, coupled by bargain-hunting activity from investors.

However, cautious outlook came as other glove producers such as Hartalega, Supermax and Careplus warned that glove prices are coming off, indicating that ASP may have peaked this quarter.

In this article, we gather some info on Hartalega and below is the summary & target prices given by various research houses.

Recap on the Latest Quarterly Result of Hartalega

On 4th May 2021, one of the world's largest rubber glove producers - Hartalega Holdings Bhd, announced that the company registered a net profit of RM1.1billion during last 
quarter of FY21 which soared 11.7% qoq and 878.2% yoy on the back of massive revenue of RM2.3billion, +8.0% qoq and +195.5% yoy. Some use the term 'super-normal' to describe the earnings outcome.

As for the full year of FY21, both revenue and net profit accelerated 129% yoy and 565.4% yoy respectively, spurred by sturdy sales volume on the back of higher average selling price (ASP).

Hartalega, in a statement, said that the strong performance for the year was primarily due to significantly higher sales revenue, driven by higher average selling prices and increased sales volume. In a separate note, Hartalega has contributed RM90million to the government’s Covid-19 fund in February 2021.

TA Research reiterate Buy with an unchanged TP of RM17.12 based on 26.0x FY23 EPS.

AffinHwang Capital raise their 2022-23E earnings forecasts by 3.2%-3.8% to factor in the higher realised ASP for the quarter. However, they are pegging the valuations to a lower PE multiple of 20.0x (at -1SD of historical average), which is lower than the previous 23.5x (at historical average), as investors remain sceptical on the ASP trend, and lower their TP to RM14.90 (from RM17.00). However, they are keeping their BUY call, stating that the current valuation is still attractive. Highlighted key downside risks are: 1) unexpected disruption to its production line, and 2) spike in volatility in the USD/MYR.

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