MORNING CALL:14/12/23

Maybank has a change of heart on Hartalega’s prospects

Transcript

00:00 This Thursday, we are taking a look at Hartelega Holdings, where Maybank IB Research recently

00:05 upgraded its call from hold to buy after the most recently renewed round of interest in

00:10 glove stocks. At its RM3.2 target price, this implies an upside of just over 19%.

00:16 While management remains cautious on sector outlook, it has turned more positive and expects

00:20 a better second half of FY24 on better cost efficiency and higher utilisation rate post

00:27 the decommissioning of its Bestari Jaya facility. The utilisation rate is expected to improve

00:32 to over 50% in coming quarters, leading to lower production costs. There is also expected

00:38 a significant improvement in sales volume following the downward adjustment in ASP.

00:43 On top of the lower pricing, Maybank believes the better sales volume is also driven by

00:47 restocking activities.

00:49 ASP is expected to remain under pressure due to stiff competition. However, raw material

00:54 prices are showing signs of stabilising with both natural latex and nitrile latex prices

01:00 declining by 3% and 1% respectively since November 2023. Maybank raises its FY24, 25,

01:07 26 core earnings forecast by 116%, 2% and 3% after factoring in all those earlier factors.

01:16 According to data from Busan Marketplace, the split is pretty even, only there are 7

01:20 sells, 6 buys and 6 holds, which is pretty in line with analysts' consensus of the

01:25 glove industry as a whole. Hence why it averages target prices just around RM2.15, which is

01:31 38 cent below its last close.

01:33 [Music]