$HARTA (5168.MY)$ Target Price RM 4.60(source: klsescreener)...

Hartalega could continue to benefit from a gradual improvement in sales volume and ASP backed by an expected surge in glove demand from US clients.

PETALING JAYA: The rise in US orders and average selling prices (ASP) of gloves may see Hartalega Holdings Bhd post stronger half-on-half financial results in the second half of financial year 2025 (2H25).

This is about 69% of CIMB Research’s financial year 2025 (FY25) core net profit estimates, followed by a 92.4% year-on-year rise in FY26 core net profit.

Hartalega could continue to benefit from a gradual improvement in sales volume and ASP backed by an expected surge in glove demand from US clients, driven by higher tariffs on China-imported medical gloves, it said. The rise in tariffs is expected to be 50% from 7.5% currently, with a further increase to 100% from January 2026 onwards.

CIMB Research also assumes a US dollar and ringgit of 4.50 for FY25, FY26, and FY27. Based on its sensitivity analysis, every 1% strengthening of the ringgit against the US dollar will lower its FY25 to FY27 earnings per share projections by 0.3 to 0.4%.

The research house retains its “buy” call on the stock with a higher target price of RM4.60 a share from RM3.65 a share.

Hartalega will be able to cater for higher orders with new capacity from its NGC 1.5 plant coming onstream in the third quarter of FY25 (3Q25), which is 29.7% growth in annual capacity.

As of 2Q25, the ASPs for Hartalega stands at US$21 to US$22 per 1,000 pieces. Hartalega expects the increase by US$1 to US$2 per 1,000 pieces in the second half of financial year 2025, backed by stronger client demand and a more profitable sales mix.

The latter is mainly on the back of expectations of higher sales to US-based customers, which carry higher ASPs compared with clients in other regions. About 56.7% of Hartalega’s sales in 2Q25 were derived from clients in North America.

Hartalega announced a one-off special dividend of 10.85 sen per share on Dec 9, 2024, with the entitlement date being Dec 23, 2024. This amounts to a total dividend payout of RM370.8mil, which will be supported by its robust total net cash position of RM1.3bil as at end-2Q25.

This one-off could be in conjunction with the dividend tax effective Jan 1, 2025. Excluding this special dividend, Hartalega is expected to maintain its annual dividend payout ratio of at least 50% of its annual profit after tax.The FY25 to FY27 dividend assumptions stand at 50% of its annual profit after tax, with its FY25 dividend projection inclusive of the special dividend.