Hartalega Holdings Bhd's second-quarter financial year of 2025 (2QFY25) results have opened to mixed projections from analysts, revealing both progress and ongoing challenges in the face of higher operating costs and evolving market dynamics.

RHB Investment Bank Bhd (RHB Research) and Maybank Investment Bank Bhd (Maybank IB) have issued a BUY recommendation for the company with a revised target price (TP) of RM3.70 and RM4.31 respectively.

Conversely, MIDF Amanah Investment Bank Bhd (MIDF Research) keeps a NEUTRAL recommendation, citing cautious optimism with a revised TP of RM3.29.

RHB Research's positive stance is bolstered by expectations for sustained restocking activities, price increases, and potential benefits from trade shifts amid the strained US-China relations while Maybank IB expects a stronger second-half performance as Hartalega benefits from anticipated higher sales volumes, increased average selling prices (ASPs) and a stable US dollar and Malaysian Ringgit exchange rate.

MIDF Research noted that while demand recovery is visible, competition and elevated raw material costs pose ongoing concerns.

For 2QFY25, Hartalega reported a core loss of RM29.5 million due to unfavourable foreign exchange movements and increased raw material expenses.

The company did, however, experience sequential improvements, with ASPs rising 2.8% quarter-on-quarter to US$21.40 per 1,000 pieces and a 15.5% increase in sales volume, yielding a plant utilisation rate of 89.5%.

Notably, global logistics issues had delayed the shipment of around 450 million gloves, though these were subsequently fulfilled in the following quarter. MIDF Research, meanwhile, highlights a deferred tax asset recognition of RM56.1 million, which contributed significantly to the RM42.7 million normalised profit for the quarter. Excluding this factor, the quarterly performance would have been less favourable, reflecting the pressure from rising costs.

Nevertheless, RHB Research remains optimistic about Hartalega's outlook, noting that industry dynamics are supportive, as glove manufacturers benefit from customer acceptance of ASP hikes, which are expected to rise further in 4Q. The research house also observes that Malaysia's glove exports could continue growing as geopolitical tensions between the US and China prompt potential trade diversions, creating fresh opportunities for local manufacturers, particularly in the premium-priced US market.

Meanwhile, MIDF Research said although Hartalega's ongoing efforts in operational efficiency are expected to support higher output while potentially offsetting some raw material costs, the research house remains cautious, citing stretched valuations and a potential uptick in labour costs due to minimum wage adjustments. MIDF Research expects a volume uptick in the second half of FY25, but maintains a conservative approach, given the continued challenges in cost management.