Hartalega / Kuan Kam Hon

[winston]

vested

What’s New

Robust earnings above expectations

Solid performance due to surge in volume and higher ASP

Expect strong earnings to persist, backed by higher ASP

Maintain BUY with TP of RM25.30

Source: DBS

https://researchwise.dbsvresearch.com/R ... =gaacakiia

[winston]

vested

Hartalega still has room to grow but some analysts cut target prices

by Syafiqah Salim

Source: theedgemarkets.com

https://www.theedgemarkets.com/article/ ... get-prices

[winston]

not vested

Securing long-term plan via KPSBEZ

Hartalega has inked a SPA with Northern Gateway Sdn Bhd (MOF) to acquire 250 acres of freehold land in Bukit Kayu Hitam, Kedah for RM229m.

Hartalega plans to invest RM7bn over the next 20 years to build 16 new glove plants on this land (with a total annual capacity of about 80bn pieces).

We maintain our Add call with unchanged TP of RM21.80 (26x CY22F P/E).

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... BF00426A5B

[winston]

vested

Analysts maintain 'buy' calls on Hartalega but some cut target prices, earnings estimates

by Tan Siew Mung

While maintaining it's "outperform" call on the stock, Kenanga trimmed his TP for Hartalega to RM17 from RM21, based on 17 times 2022 estimated earnings per share (EPS), due to the industry’s reduced lead time and diminishing sentiment on the sector.

TA reduced it's FY21 earnings estimate for the group by 14.8% after lowering his sales volume assumption by 9% as production in the fourth quarter ending March 31, 2021 (4QFY21) is expected to drop due to Covid-19 cases at its plants. The TP is lowered to RM17.12 per share (previously RM23.60 per share) based on 26 times FY23 EPS,”

AmInvestment Bank Research also lowered its TP for Hartalega to RM11.20, from RM13.56, reflecting a neutral environmental, social and governance (ESG) rating of three stars as the local research house maintained its "hold" call on the stock. “Our valuation is based on 25 times 2022 forecast EPS, which is at a 1 SD (standard deviation) discount on the five-year historical average.

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/558253

[winston]

4QFY21: Affected by lower sales volume

FY3/21 final net profit of RM2.9bn (+563% yoy) came in 15% below expectations, due to weaker-than-expected sales volume in 4QFY21.

Hartalega expects 1QFY3/22F ASPs to be higher qoq, before trending lower from 2QFY22 onwards, which is in line with our view.

TP is lowered to RM11.80 (26x CY23F P/E), in tandem with our EPS cuts and as we roll over our valuation year to CY23.

TP: RM 11.80

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 7A1B678055

[winston]

not vested

4QFY21: Within Expectations; ASP Outlook Remains Intact

4QFY21 results were within our expectations.

Despite significantly higher ASPs, sales volume was plagued by operational disruptions arising from a minor COVID-19 outbreak and restricted shipping availability.

Utilisation rates have since been optimised against the backdrop of higher ASPs going forward.

Furthermore, NBR is expected to normalise.

Valuations appear to have fully factored in its attractive prospects.

Maintain HOLD and target price of RM9.30. Entry price: RM8.00.

Source: UOBKH

https://research.uobkayhian.com/content ... b4f981a513

[winston]

not vested

Valuations still palatable
Trading at ex-cash FY24E PE of 25x; maintain BUY

4QFY21 results was below our expectation as COVID-19 outbreak at its plants has resulted in a sharp drop in its sales volume.

However, we expect its 1QFY22 earnings to jump as its plant utilisation rate has already recovered to c.90% level and margin could expand on a slightly higher ASP
amid a softer NBR cost.

Maintain our FY22-23E EPS and introduce FY24E.

Our DCF-based TP is lowered to MYR13.10 (-20%; WACC: 7.2%) as we lower our terminal growth rate to 3.5% (from 4.5%) to account for the rapid supply growth from China. Maintain BUY.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/219388.pdf

[winston]

Valuation

Our RM17.00 TP is based on 25x CY22F EPS equivalent to its historical 5-year mean.

We roll forward our base year to CY22 (from CY21), which reflects normalised earnings.

We believe valuations are attractive with the stock trading below -1 SD of its 5-year mean.

Source: DBS

https://www.dbs.com.sg/treasures/aics/s ... ART_MK.xml

[winston]

not vested

Kenanga lowers expectations on Hartalega

KUALA LUMPUR: Kenanga Research is taking a more conservative outlook on Hartalega Holdings Bhd on expectations that the average selling price (ASP) of nitrile could be waning.

In its recent earnings announcement, Hartalega's FY21 Patami came in below expectations at 88% and 94% of Kenanga's and consensus estimates due to lower-than-expected volume sales, arising from global container shortages.

"We lower our FY22E net profit by 12% after conservatively lowering our ASP from USD65/1,000 pieces to USD62/1,000 pieces.

"Our FY23E ASP assumption remains pegged at USD40/1,000 pieces," said Kenanga.

Hartalega expects the container shortage to be resolved in the next quarter and ASP is forecast to be higher in 1QFY22.

However, Kenanga said the recently announced results of industry peers suggest that the nitrile ASP uptrend could be waning and is expected to soften on the back of still-robust demand, albeit at a slower pace.

According to the Malaysian Rubber Glove Manufacturers Association, the global shortage of rubber gloves will last beyond 1Q 2022 with growth rate averaging between 15% and 20% per annum going forward with still high lead time averaging six to eight months though lower compared to 12 to 14 months previously.

Kenanga reiterated its "outperform" recommendation on Hartalega although it lowered its target price to RM16 from RM17 previously, based on an unchanged 17x 2022 forecast earnings per share of 94.1 sen.

"Our target PER is at a 35% discount to normalised 5-year pre-COVID historical forward mean averaging 26-28x," it said.

Source: The Star

https://www.thestar.com.my/business/bus ... -hartalega

[winston]

not vested

No excessive downward pressure on ASP, says Hartalega

KUALA LUMPUR: Hartalega Holdings Bhd's product average selling price (ASP) could continue to show improvement quarter-on-quarter although this is expected to taper in 2QFY22, its management has guided.

"However, management expect orders to creep up from Aug 2021 and hence do not expect excessive downwards pricing pressure," said Kenanga Research following a conference call with Hartalega's management.

However, Hartalega's management guided that ASP is expected to taper 20% in 2QFY22.

The ASP trend is expected to soften albeit at a slower pace going forward as lead times have been reduced to 90 to 120 days from 150 days previously.

Post-Covid, the inventory restocking cycle is expected to spur demand, coupled with increased usage arising from new users and inreased hygiene awareness, said Kenanga.

According to the Malaysian Rubber Glove Manufacturers Association, the demand surge for rubber gloves will last beyond 1Q 2022 with growth rate averaging between 15% and 20% going forward.

Kenanga lowered its FY22 net profit projection on Hartalega by 6.5% to account for the lower utilisation rate.

It reiterated "outperform" on the counter but downgraded its target price to RM13.80 from RM15.76 previously based on 15x 2022 forecast earnings per share of 92 sen.

Source: The Star

https://www.thestar.com.my/business/bus ... -hartalega