KUALA LUMPUR: AmInvestment Bank Research has retained its "hold" recommendation on Hartalega Holdings Bhd
while lowering its earnings forecasts for 2022.
"We believe that the stock is fully valued with a PER of more than 35x FY23F EPS," it said.
The research house said the company expects demand to oustrip supply for the next 12 months with a structural step-up where glove demand is expected to grow 12% to 15% per annum.
The glove maker has also guided for average selling price to increase about 50% in the coming quarter.
While AmInvestment raised its FY21 net profit forecasts by 18%, it expects ASP to decline in 2022 with the availability of the vaccine cutting into demand.
"We are cutting our FY22–23 earnings’ estimates by 24% and 30% respectively by lowering ASP assumptions to US$33/1,000 pcs and US$32/1,000 pcs (from US$34 for both)," it said.
With regards to the Covid-19 infections among its employees Hartalega has initiated precautionary mass testing, and carried out disinfection in its premises and quarantine on its workers.
Hartalega has closed eight production lines for a month, which will impact output by less than 0.5%.
"Hartalega’s implementation of stringent measures – social distancing among workers, good hygiene, readiness of a quarantine centre and working/accommodation area segregation – has successfully curbed the spread of the virus, recording a significantly low positive rate of 0.4%," said AmInvestment.
while lowering its earnings forecasts for 2022."We believe that the stock is fully valued with a PER of more than 35x FY23F EPS," it said.
The research house said the company expects demand to oustrip supply for the next 12 months with a structural step-up where glove demand is expected to grow 12% to 15% per annum.
The glove maker has also guided for average selling price to increase about 50% in the coming quarter.
While AmInvestment raised its FY21 net profit forecasts by 18%, it expects ASP to decline in 2022 with the availability of the vaccine cutting into demand.
"We are cutting our FY22–23 earnings’ estimates by 24% and 30% respectively by lowering ASP assumptions to US$33/1,000 pcs and US$32/1,000 pcs (from US$34 for both)," it said.
With regards to the Covid-19 infections among its employees Hartalega has initiated precautionary mass testing, and carried out disinfection in its premises and quarantine on its workers.
Hartalega has closed eight production lines for a month, which will impact output by less than 0.5%.
"Hartalega’s implementation of stringent measures – social distancing among workers, good hygiene, readiness of a quarantine centre and working/accommodation area segregation – has successfully curbed the spread of the virus, recording a significantly low positive rate of 0.4%," said AmInvestment.
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