KUALA LUMPUR: Hartalega Holdings Bhd is expected to deliver better quarter-on-quarter (QoQ) earnings from the third quarter of financial year 2025 (3Q25) onwards, according to Hong Leong Investment Bank Bhd (HLIB Research).
The firm said going into 3Q25, the group aims to deliver 2.3 to 2.5 billion pieces per month, an increase of about 8.5 per cent from the 2.3 billion in 2Q25.
In terms of capacity, Hartalega ramped up 10 lines, instead of the previously guided five lines, in the more efficient NGC1.5 facility during 2Q25 to meet the recovering demand, especially from US customers, primarily due to US tariffs on China.
"This will bring Hartalega's annual installed capacity from its existing 32 billion pieces to 37 billion pieces.
"Given its forecasted plant utilisation rate to hit 81 per cent based on installed annual capacity of 37 billion, we believe there could be further ramp-ups of production lines in 3Q25, implying that additional ramp-up costs will be incurred," it said in a note today.
HLIB Research also said Hartalega had indicated that the group's blended average selling price (ASP) will increase by approximately US$1 to US$2 per 1,000 pieces in 3Q25 to offset the recent forex impact.
It added that December orders could also see potential profit margin expansion, mainly boosted by the "US premium" among Malaysian players.
"In terms of input costs, nitrile butadiene rubber (NBR) prices are expected to be flattish QoQ due to lower butadiene prices.
"Separately, the US dollar has been strengthening against the ringgit since late September, which bodes well for Hartalega.
"All in, we expect Hartalega to deliver better QoQ earnings from 3Q25 onwards," it noted.
However, HLIB Research has downgraded Hartalega's rating to "Hold" with a lower target price (TP) of RM3.32.
The firm said this is given that Hartalega's shares have exhibited an upward trajectory since its last upgrade back on Aug 7 and the recent results shortfall.
Meanwhile, CIMB Securities Sdn Bhd expects Hartalega to post stronger half-on-half (HoH) results in the second half of FY25 (2HFY25), accounting for 71 per cent of its FY25 forecast core net profit estimates.
This will be followed by a 92.4 per cent year-on-year (YoY) rise in the forecasted core net profit for FY26.
"In addition to the recent weakening of the ringgit against the US dollar, we expect
Hartalega to continue to benefit from a gradual improvement in sales volume and ASPs.
"This will mainly be backed by an expected surge in glove demand from US clients, driven by higher tariffs on China-imported medical gloves to the US starting in January 2025 (rising to 50 per cent from 7.5 per cent currently), with a further increase to 100 per cent from January 2026 onwards.
"As at 1HFY3/25, 56.7 per cent of Hartalega's sales were derived from clients in the North America region," it said.
Overall, CIMB has maintained a "Buy" call on Hartalega with a higher TP of RM3.65.
The firm said within the glove sector, it favours Hartalega as it is the key beneficiary of the higher US tariffs on China-imported gloves from 2025 onwards, given its significant exposure to the US market among glove stocks under coverage.
Additionally, the firm said the group also boasts the highest profit margins among its peers, and it is a market leader in nitrile glove manufacturing technology.