PETALING JAYA: Hartalega Holdings Bhd
’s earnings for the second quarter of its financial year ending March 31, 2026 (2Q26) is expected to remain flattish as higher plant utilisation and stronger sales are offset by the appreciation of the ringgit against the US dollar.
To mitigate margin pressures, the glove maker will continue to enhance operational efficiency through ongoing automation initiatives at its Next Generation Integrated Glove Manufacturing Complex in Sepang, Selangor.
According to Phillip Research, the group recorded a 2% reduction in headcount per million pieces and a 7% decrease in overall manufacturing costs.
“On the production front, overall plant utilisation improved to 70% in 2Q26 from 67% in 1Q26, underpinned by stronger US demand. Sales volume reached 5.9 billion pieces in 1Q26, with management guiding for a moderate quarter-on-quarter uptick to around 6.2 billion pieces in 2Q26 driven by restocking activity from the US market,” the research house said in a report.
It said while raw material costs had eased, this offered limited respite from ongoing pricing competition.
Nitrile latex prices dropped 35% year-on-year (y-o-y) to US$0.97 per kg in the third quarter of this year, while natural rubber eased 20% to US$1.38 per kg.
Domestic gas prices, meanwhile, declined 10% y-o-y to RM39.70 per million British thermal units, mirroring the softness in Brent global crude prices in the second quarter of this year.
“While cost reductions provided some relief, the advantage was eroded mainly by persistent price competition, resulting in continued margin pressure.”
The research house noted that the United States remained Hartalega’s largest export market, accounting for 56% of its total exports.
Malaysia’s share of the US glove market rose to 59% from 44% as China’s share declined to 6% from 32% in the first half of this year.
Taking this into account, Phillip Research has revised the stock’s 12-month target price to RM1.08 from RM1.34 after lowering the price-to-book multiple to 0.8 times from one times.
The lower valuation reflects sustained structural challenges and global overcapacity, which are likely to continue weighing on sales volumes and margins, limiting the pace of earnings recovery.
“Maintain ‘hold’ rating.
“Risks to our call include sales volumes, prices, raw-material trends, sharp appreciation of ringgit versus the US dollar, and pricing strategy by Chinese competitors,” it said.
