PETALING JAYA: Hartalega Holdings Bhd
’s return to the black in the first quarter of financial year 2025 (1Q25) reflects encouraging growth for the world’s largest nitrile medical glove producer, amid signs of recovery in demand in the glove industry.
This was despite a massive overcapacity situation within the sector, said analysts.
Maybank Investment Bank (Maybank IB) Research in a report said Hartalega was on track to post stronger earnings in 2Q25 due to increased sales volume from delayed shipments in 1Q25 and a higher plant utilisation rate (UR).
The group’s 1Q25 core net profit jumped to RM32.9mil, accounting for 18% and 16% of both the brokerage firm and consensus for financial year 2025.
Maybank IB Research said some of the key takeaways from Hartalega’s recent conference call include its UR improved to 78% in 1Q25 from 73% in 4Q24.
Given the stiff competition from domestic glove makers, Hartalega may also not be able to fully pass on its additional operating costs to ensure strong sales volume, which leads to better cost efficiency.
Maybank IB Research has maintained its earnings forecasts with a “buy” call on the stock at a target price (TP) of RM4.28.
Meanwhile, Hong Leong Investment Bank (HLIB) Research in a note to clients said it expects Hartalega to deliver a flattish 2Q25, followed by stronger sequential earnings in 3Q25 onwards.
The supporting factors include the commencement of the inventory replenishment cycle, potential trade diversion from the United States to Malaysia as a result of US Food and Drug Administration import alert issues and higher import tariff on China in 2026, lower cost structure post decommissioning of Bestari Jaya plant, as well as the commissioning of NGC1.5.
“We upgrade Hartalega to a ‘buy’ from ‘hold’ with an unchanged TP of RM3.62.”
For RHB Research, it has kept a bullish outlook on Hartalega with a “buy” call and a new TP of RM3.55.
The research house noted the group’s 1Q25 results were in line “as we expect stronger quarters ahead, backed by a pick-up in restocking activities, customers’ greater acceptance of its cost pass-throughs and cost normalisation.”
RHB Research also continues to like Hartalega for its robust balance sheet, efficient operating model, and the company being a key beneficiary of the secular recovery in the medical glove sector.
Kenanga Research, meanwhile, said Hartalega’s 1Q25 results have beaten its forecast, but disappointed the market.
“It returned to the black in 1Q25 year-on-year in the absence of high-cost inventory.
“However, massive industry overcapacity will continue to weigh on the sector, while Hartalega’s valuations are frothy,” the brokerage firm noted. It maintained a TP of RM2.33 with an “underperform” call.
