Published: Wednesday August 8, 2012 MYT 8:54:00 AM
RHB Research maintains Market Perform on Hartalega
It said on Wednesday the first quarter ended June 30's core net profit of RM54.7mil was within expectations, accounting for 23.7% of its full-year estimates.
“Quarter-on-quarter, sales volume declined 3.1%, mainly due to lower nitrile gloves sales volume (-3.9% on-quarter). We believe this was caused by customers shifting purchases from nitrile to latex gloves, in view of the lower latex prices,” it said. Nevertheless, RHB Research said the Q1 earnings before interest and tax (EBIT) grew by a faster pace of +10.7% on-quarter thanks to the 2.0 percentage points expansion in margin on the back of a stronger US dollar rate during the quarter and time lag in passing on the lower nitrile price, which resulted in a 9.8% increase in Hartalega's core net profit on-quarter. “While the lower latex prices could result in price-sensitive customers shifting purchases from nitrile to latex gloves, we believe this would be cushioned by the maiden contribution from Plant 6, which is scheduled to begin commercial production in September 2012. We thus maintain our Market Perform call on the stock,” said the research house.