PETALING JAYA: Hartalega Holdings Bhd
is positioning for a potential turnaround in the coming months, buoyed by early signs of demand recovery and an anticipated rebound in average selling prices (ASPs).
The group remains cautiously optimistic about its near-term prospects, with management flagging “early signs of recovery in sales orders from US customers for May 2025” and anticipating “a more meaningful replenishment” in June as inventories are drawn down.
Hong Leong Investment Bank (HLIB) Research, following a recent engagement with the company, maintained its earnings forecasts for financial year ending March 31, 2025 (FY25) to FY27.
The brokerage reiterated its “buy” call with an unchanged target price of RM2.66. It views Hartalega’s risk-reward profile as compelling, especially in light of the group’s positioning amid tariff dynamics and ongoing sector consolidation.
On the volume front, HLIB Research noted that Hartalega expects a 15%–20% quarter-on-quarter decline in sales for fourth quarter (4Q) of FY25—an outlook consistent with prior guidance. However, sentiment is improving.
“We see scope for a renewed wave of accelerated purchases during the 90-day tariff pause announced on April 10, 2025; a development that could offer a timely uplift in volumes and ASP,” the research house said.
While temporary, the tariff reprieve is seen as a positive short-term catalyst, it noted.
ASP trends have softened since their peak in December 2024 due to weaker volumes. Nevertheless, Hartalega is preparing to implement a price hike in July 2025, conditional upon a sustained recovery in June.
“The group is looking to raise ASP beginning July 2025, contingent upon a potential recovery in US demand in June 25,” HLIB Research highlighted.
In response to cost-sharing requests from US buyers, Hartalega has declined proposals to absorb the recently imposed 10% tariff, citing its ongoing financial recovery.
“Management has declined such proposal, citing its still-recovering financial position,” the brokerage pointed out, noting the stance aligns with that of other local peers, who are prioritising financial resilience over short-term volume gains.
Structurally, HLIB Research remains upbeat on the glove sector’s medium-term outlook.
“We remain positive on the sector’s recovery trajectory, with demand-supply equilibrium expected by 2026,” it said, adding that Malaysia’s status as the lowest-tariff glove-exporting nation further strengthens its position in global trade negotiations, offering potential long-term tailwinds for domestic manufacturers.
With Hartalega’s share price having fallen 46% year-to-date, HLIB Research believes current valuations offer an attractive entry point, citing compelling risk-reward profile.
