KUALA LUMPUR (Aug 5): Analysts are turning cautious on Hartalega Holdings Bhd (KL:HARTA) as sharply correcting average selling prices (ASPs) are expected to test its profitability in the coming months.
Analysts are expecting the world’s largest nitrile glove manufacturer to be strained by tightening margins in the coming quarters, despite the group’s first quarter already accounting for 45% of consensus full-year forecasts with a core net profit of RM70 million in the quarter ended June 30, 2026 (1QFY2027).
“Margins are likely to come under pressure due to the sharp correction in ASPs, coupled with the impact of high-cost nitrile raw material inventory,” said TA Securities, which slashed its earnings forecasts for FY2027-FY2029 by 4.1%-4.2%.
Hartalega had previously bought nitrile raw material at elevated prices before the ASP corrected.
“The glove industry is likely expected to raise ASPs by approximately US$1.50-2.00 (RM6.14-8.18) per 1,000 gloves in 3QFY2027, to offset the higher raw material and natural gas costs.”
However, Maybank Investment Bank highlighted that a rise to ASPs could create new challenges amid the current market oversupply and intense competition from foreign-based producers, with Hartalega having to match intense competition from Vietnam and Indonesia-based producers while China glove makers also expand their capacity.
The house has not discounted the possibility of a “prolonged price war”, and has accordingly cut its earnings forecast for FY2027 by 18%.
Addressing the market glut, Hartalega has made cost optimisation a key focus, with plans to upgrade and commission production lines for its Plant 3. “With Plant 9 fully operational and Plant 3 upgrades on track for completion by Dec 26, further cost reductions could be supported,” said Maybank.
Hartalega slid four sen or 3.8% to RM1.02 a share at the time of writing on Wednesday, with the group’s market capitalisation now valued at RM3.49 billion.
The 19 research houses tracking Hartalega on Bloomberg currently maintained a more cautious stance on the stock, with 12 ‘hold’, three ‘buy’ and four ‘sell’ calls. The average 12-month target price is RM1.10 a share.