KUALA LUMPUR (Jan 16): Affin Investment said it believed Hartalega Holdings Bhd would be able to achieve the full net profit target of RM230 million for its financial year ending March 31, 2013 (FY2013), as demand for gloves was robust and the company had improved on its operating efficiencies.
In FY2012, the company recorded a net profit of RM201.43 million, and forecast an 11% year-on-year growth for FY2013.
Affin maintained Hartalega’s target price of RM5.15 and 'add' rating, according to the research house’s note today. At 11.42am, the company’s shares were up one sen to RM4.94, with an intraday high of RM4.95 and low of RM4.92.
In the note, Affin said it expected the glove sector to remain healthy this year, as demand for gloves was robust and the company had improved on its operating efficiencies.
"In addition, we believe the sector’s key driver -- latex and nitrile costs -- will stay at a favourable level of around RM6 to RM7 per kg and US$2.20 to US$2.40 per kg respectively," said the research house.
Affin noted that Hartalega’s new production facility had four production lines that could produce about 45,300 glove pieces per hour per line, whereas the industry’s average was about 28,000 pieces per hour. Six more production lines will be completed by July this year.
"We note that the current level of automation is about 80%, and management is targeting 100% full automation by end-FY2014. The remaining 20% labour intensive part is in the quality control and packaging line," said Affin.
"[Hartalega’s] management guided that demand for synthetic nitrile gloves from its quality demanding customers in the US, Japan and Germany remained resilient. The company’s nitrile sales have grown at a compound annual growth rate of 72% from 2004 to 2012."