KUCHING: Hartalega Holdings Bhd (Hartalega) is looking into building more gloves manufacturing plants to increase its production capacity to meet the increasing demand for gloves.
AllianceDBS Research Sdn Bhd (AllianceDBS Research) in a report yesterday said Hartalega will proceed to build two more sizable manufacturing plants which are similar to its next generation complex (NGC) over the next two years.
The research firm analyst Tan Kee Hoong noted that the glove manufacturer will likely start construction works for its new plants in the second half of financial year 2016 (2HFY16) and the plants are scheduled for completion in financial year 2017 (FY17).
Tan observed that the new plants which will be similar to Hartalega’s NGC will have two manufacturing plants with each having 12 production lines and is expected to produce an estimate of 4.5 billion pieces of gloves annually.
In the meantime, Tan said Hartalega is going to start manufacturing gloves from its first two production lines at its NGC beginning January instead of the earlier planned timeframe of December last year due to weather-related issues.
He noted the company will gradually start two new production lines each month.
He believes that at the rate which Hartalega is progressing for the commission of new production lines, the company’s two manufacturing plants at NGC will be fully operational with 12 production lines each by January next year (2016).
Nonetheless, Tan remains cautious on the future earnings of Hartalega and has adjusted the company’s FY15, FY16 and FY17 earnings forecast slightly downward.
He opined that Hartalega is facing rising competition as the other glovemakers are moving into the nitrile glove segment while noting the the profit margin which the company enjoyed may not be sustainable.
Despite that, he believes Hartalega will continue to maintain its sales growth supported by higher demand and capacity expansion.