KUALA LUMPUR (July 31): Hartalega Holdings Bhd (KL:HARTA) is expected to deliver a sharp jump in core net profit for the first quarter thanks to higher product prices and volume, said RHB Investment Bank.

The house expects Hartalega to deliver core earnings of RM20 million-RM25 million for the first quarter ended June 30 (1QFY2025) versus RM1.8 million in the fourth-quarter, or 4QFY2024. Hartalega is scheduled to report its on Aug 6.

Average selling prices (ASP) rose 5% quarter-on-quarter while demand outlook improved and operating efficiency gain, RHB IB said in a results preview note. Revenue meanwhile likely grew 13.6% to MYR602 million in 1QFY2025, it said.

“We maintain our bullish stance and believe valuation re-rating is warranted based on the gradual uptick in market dynamics,” RHB said.

RHB IB has maintained its “buy” rating on Hartalega at RM3.34 with target price of RM4.10 based on a discounted cash flow valuation.

In terms of cost, RHB IB estimates a 3% increase in 1QFY2025, attributed to higher nitrile and natural gas prices. Net margin will likely improve further to 4% from 0.3% in 4QFY2024.

While RHB IB made no changes to Hartalega’s earnings estimate, the research house, however, believes it is set to improve.

“We like Hartalega due to its robust balance sheet, efficient operating model, and being a key beneficiary of recovery in the medical glove sector,” RHB IB said.

Broadly, the industry’s “operating dynamics are turning in favour of the glove manufacturers, as customers are more receptive to ASP increases,” the house noted.

Profitability of glovemakers in the coming quarters will be also anchored by the pricing gap to the China glovemakers narrowing to US$2-US$3 from US$4-US$5 per thousand pieces, RHB IB said. Further, demand outlook improved in April-June with Malaysia’s glove exports volume rising 8% quarter-on-quarter and 29% year-on-year, it added