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.