KUALA LUMPUR: Hartalega Holdings Bhd is expected to secure higher orders and sales volume in the second half of financial year 2024 (2HFY24), as customer replenish low inventory levels.
The glove manufacturer reported a net profit of RM27.7 million in the second quarter of FY24, owing primarily to an eight per cent increase in sales volume, quarter-on-quarter.
Hartalega's core net profit increased to RM25.5 million in the quarter under review, exceeding both the street's estimates of 79.8 per cent and the research firm's estimates of a net loss for the full fiscal year FY24.
"The discrepancy in our forecast was mainly due to a higher-than-expected sales volume.
"We raise our FY24 forecast from a net loss of RM35.9 million to a core net profit of RM65.5 million, as we expect Hartalega to record higher sales volume in 2HFY24, underpinned by customers' low inventory levels."
PublicInvest Research, however, noted that average selling prices (ASPs) are expected to drop as customers are still not willing to absorb any incremental cost from prevailing pricing competition from Chinese glove players.
"Nevertheless, we believe the lower raw material prices and the strengthening of the US dollar would be favourable to Hartalega.
"Alongside capacity rationalising, utilisation rate is expected to improve for better operational efficiency," it said in a research report.
PublicInvest upgraded its call for the stock to "neutral" from "underperform", with a higher target price of RM2.11.
