Hartalega Receives "Maintain Buy" Rating From RHB

Hartalega operates in the consumer cyclical sector, focusing on rubber products, particularly gloves. The company has shown resilience despite recent market challenges.

– Revenue Trends: Hartalega's revenue is expected to recover from RM1.84 billion in FY24 to RM2.6 billion in FY25, marking a 41.5% growth, following a 23.7% decline in FY24.

– Profitability: Recurring net profit is forecasted to increase sharply from RM31 million in FY24 to RM165 million in FY25, with a growth rate of 441.5%, and the net profit margin improving from 1.6% to 6.4%.

– Valuation Metrics: The recurring P/E ratio is projected to decrease from 317.41 in FY24 to 58.61 in FY25, indicating a more favorable valuation, while the P/B ratio is expected to remain stable at 2.0x.

– Industry Favorability: The glove manufacturing industry is experiencing positive dynamics with rising demand and potential trade diversions due to higher tariffs on Chinese competitors.

– Export Growth: Hartalega's export volume of gloves showed a significant increase, suggesting a strong recovery.

– US Tariff Impact: The imposition of higher tariffs on Chinese glove makers is expected to benefit Hartalega by diverting trade and potentially increasing earnings.

The "Buy" rating is supported by Hartalega's solid balance sheet, improving market conditions, and the potential positive impact of US tariffs on Chinese competitors.

– Risks: Potential risks include decreases in ASP, slower capacity expansion, lower utilization rates, higher raw material prices, and currency fluctuations affecting earnings.

– Opportunities: Hartalega could benefit from trade diversions due to higher tariffs on Chinese competitors, leading to increased market share.

Hartalega is well-positioned to take advantage of favorable market conditions and global trade shifts due to tariff changes. Despite risks related to currency and raw material costs, the company's strong financial performance and strategic industry positioning make it an attractive investment with a positive outlook. Investors are advised to maintain a "Buy" stance, considering the company's market potential.