PETALING JAYA: Analysts have cut their net profit target by 25% for Hartalega Holdings Bhd
for the financial year ending March 31, 2026 (FY26) in line with a decrease in earnings margin assumption.
Kenanga Research said expected margin cut from 14% to 12% was due to foreign exchange (forex), where it has conservatively assumed that Hartalega would not pass on any forex impact to customers in the immediate term.
“Our target price is lowered from RM4 to RM3.20 based on 2.5 times FY26 book value per share (BPVS) from 2.9 times previously to reflect the above currency effect to near-term earnings.
“There is also the likelihood that any potential market share gains in the US market might be dampened if the current onerous tariff levels that the United States has imposed on Chinese players are eased,” it told clients in a report.
Hartalega, Kenanga Research added, had a high US sales volume that accounts for between 50% and 60% of its total sales.
“Even so, we believe that in terms of price to book value valuation (PBV), its share price is trading at a level that commensurates with pre-tariff imposition.”
Before the US tariffs were imposed on Chinese glove makers in September 2024, Hartalega was trading at between 1.8 times to two times its PBV.
Assuming two times FY26 BVSP, the stock should trade at RM2.50. At last look, it was at RM1.55 per share.
Kenanga noted the company’s FY25 net profit rebounded strongly by fivefold to RM74.5mil and came in within its expectations but was 12% lower-than consensus full-year net profit forecast.
Some of the key takeaways from a briefing included the group noting that it is cautiously expecting 1Q26 sales volumes to rise 1% to 8% quarter-on-quarter or ranging between six billion to 6.6 billion pieces as it sees customers adopting a wait-and- see approach.
It expected customers to rely on inventory as opposed to re-stocking in the current environment of fluid news concerning tariffs.
As an indication, May shipments spiked up to 2.3 billion pieces but moderated back to two billion pieces in June.
Hartalega expected the inventory replenishment to return in the second half of FY26 with order visibility starting from June this year.
