PETALING JAYA: Berjaya Research Sdn Bhd expects the average selling price (ASP) for gloves in the United States to remain suppressed despite local glove makers like Hartalega Holdings Bhd gaining market share amid supply chain diversification away from China following tariffs of 120-130% which took effect from Jan 1.
This is amid anticipated new supply from Indonesia, as Chinese producers relocate production to circumvent US tariffs.
Zooming in, the research firm said Hartalega is focusing on improved operating margins amid ongoing automation efforts, stabilising material costs, and better unit cost economics, supported by a near-capacity utilisation rate (excluding Plants 3 and 4) above 95%.
On earnings, Hartalega reported a nine-month (9M) FY26 net profit of 96.4% of Berjaya Research’s previous FY26 forecast.
Revenue declined 28.6% to RM527.3 million from RM738.2 million. However, net profit, not counting adjustments for unrealised foreign exchange (forex) and derivatives, increased by 61.2% to RM43.1 million, up from RM26.7 million, thanks to improved operating margins that rose to 6.9% because of better cost management driven by the cost optimisation initiative.
Quarter-on-quarter revenue came in marginally lower by 2.3% to RM527.3 million, from RM738.2 million, due to softer blended ASP amid a stronger ringgit (RM85 vs RM90/’000 pcs in Q2 FY26), which offset volume gains (+3.2%, 6.2 billion pcs vs Q2 FY26’s 6.0 billion).
However, net profit more than doubled to RM43.1 million from RM17.6 million, driven by efficiency gains amid a favourable trend in raw material and chemical costs that stabilised on a low base.
“Despite projected earnings improvements from cost-reduction efforts, we reiterate that any ASP gains may be limited over the mid-term, given the persistently strong ringgit and ongoing diversion of new supply to the region from China, which could restrict meaningful margin expansion.
“Meanwhile, on the volume front, we expect more prominent capacity gains to only kick in once Plants 3 and 4 resume operations, with capacity estimated to expand to 30 billion pieces by FY27,“ Berjaya Research said.
On forecast, Berjaya Research revised its forex assumption to reflect recent US dollar/ringgit movements, given its heavy US market exposure at around 70%.
“We raised our operating margin expectations with FY26/27 revenue and net profit revised to RM2.22 billion/RM2.65 billion and RM107.8 million/RM147.5 million, respectively.
“We maintain our Neutral recommendation on Hartalega with a lower target price of RM0.99 (down RM0.08), based on FY27 earnings per share and a lower target price-to-earnings ratio of 23.0x,“ Berjaya Research said.
The Sun Malaysia
