The first two plants of the NGC are operational and the group has commissioned 11 production lines to date and had started construction of plants 3 and 4.
KUCHING: Hartalega Holdings Bhd (Hartalega) is off to a good start for the financial year 2016 (FY16) as analysts note that the group’s first quarter of FY16 (1QFY16) results were within expectations.
Yesterday, its shares rose three sen to RM8.63 per share with 1.47 million shares exchanging hands.
In a filing on Bursa Malaysia, Hartalega noted that in the current quarter, the group’s revenue was five per cent higher at RM320.5 million and the profit before tax was at RM79.9 million, 18.7 per cent higher when compared to the preceding quarter.
According to the research arm of TA Securities Holdings Bhd (TA Research), Hartalega’s 1QFY16 net profit of RM62.7 million was within its and consensus estimates at 22.8 per cent and 20.9 per cent respectively.
Hartalega’s 1QFY16 net profit was also within expectations JF Apex Securities Bhd’s (JF Apex) by accounting for 22 per cent of its and consensus full year estimates while it anticipated stronger earnings in the coming quarters as additional production capacity comes on stream.
JF Apex noted that on a quarterly basis, the group’s 1QFY16 revenue grew 5.1 per cent quarter on quarter (q-o-q) on the back of growing sales volume (up six per cent q-o-q) and strengthening of US Dollar.
“We view the sequential sales volume growth positively as it signifies steady demand for rubber gloves and the additional gloves supply from Hartalega’s Next Generation Integrated Glove Manufacturing Complex (NGC) is well absorbed, easing concern over issue of gloves oversupply in the industry,” it said.
JF Apex further note that operation of Hartalega’s NGC in Sepang, Selangor, which would triple the output of nitrile gloves the group produces upon completion, was commissioned in early January.
It said that the first two plants of the NGC are operational and the group has commissioned 11 production lines to date and had started construction of plants 3 and 4.
“Management is optimistic that the incoming NGC capacity and its superior margin would sustain the group’s earnings growth amid competitive environment,” it said.
On the outlook for Hartalega, TA Research noted that the group slightly missed its target of commissioning 12 production lines by 1QFY16 at Plant 1 and 2 of the NGC (11 production lines commissioned as at 1QFY16).
The delay was due to testing issues and the research arm viewed this as a minor setback.
Based on management’s expectation of a better quarter ahead, it was positive that Hartalega can still meet the group’s timeline for full commissioning of Plant 1 and 2 (24 production lines) by December 2015.
TA Research noted that the sustained utilisation rates seen after factoring in contributions from the NGC as at 1QFY16 is a positive signal, signifying the robust demand for nitrile gloves and providing comfort for healthy uptake of orders from oncoming new capacity.
The research arm further noted that construction works for Plant 3 and 4 have already begun in 2Q of current year 2015 (2QCY15).
“It is expected to be completed in 1QCY16 with commissioning in 2QCY16 and 3QCY16,” the research arm said.
It added that management is positive that incoming capacity from the NGC would help alleviate external pressures and sustain the group’s earnings.