HARTA: Robust Earnings Outperform Estimates on Cost Optimisation, Capacity Expansion Expected
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 |
| Last Traded | RM0.20 |
| Recommendation |
A major glove manufacturer reported a net profit of RM62.6 million for the first nine months of FY2026, significantly exceeding market expectations. This figure represents 85.9% of the full-year forecast and a substantial 103.2% of consensus estimates. The strong performance was primarily attributed to a lower-than-expected tax rate.
Performance Review
On a quarter-on-quarter basis, the company’s net profit saw a robust surge to RM31.6 million in 3QFY26, up from RM18.3 million in 2QFY26. This improvement occurred despite a modest 2.3% QoQ decline in revenue, which settled at RM527.3 million. The stronger quarterly showing was largely driven by a tax credit from the utilisation of unabsorbed capital allowances, coupled with enhanced production efficiency and rigorous cost optimisation measures. Sales volume also improved by 3% QoQ, reaching approximately 6.2 billion gloves, though average selling prices (ASP) saw a decline of around 5% due to a stronger Ringgit.
For the nine-month period, net profit increased 4.1% year-on-year to RM62.6 million. This growth was underpinned by ongoing cost management initiatives, including automation, digitalisation, and workforce optimisation, which effectively mitigated the impact of an 11% decline in sales volumes and an 8% drop in ASP. During the same period, revenue decreased by 17.9% to RM1.6 billion.
Future Outlook and Strategic Initiatives
Looking ahead to 4QFY26, management anticipates sales volumes to increase by 2-5% quarter-on-quarter, supported by higher customer demand. This is expected to help offset the ongoing impact of lower ASPs. The group is actively engaging with customers to partially pass through the effects of the strong Ringgit and is implementing hedging strategies. The price differential between the US and non-US markets currently stands at USD1-2 per 1,000 gloves.
Current plant utilisation remains strong at above 95%, with Plants 3 and 4 currently hibernated. The company’s newest Plant 9, boasting 4.7 billion pieces of capacity and equipped with cutting-edge technology, automation, vision systems, and advanced production solutions, is slated for full commissioning by March 2026. Following this, plans are in motion to accelerate the reactivation of Plant 3 (4.5 billion gloves capacity), which will undergo upgrades with the latest technology and is expected to be fully operational within nine months.
Analyst’s Perspective
Following the strong results, TA Securities has revised its FY26/27/28 earnings estimates upwards, primarily by reducing the effective tax rate by nine percentage points and cutting administrative costs. The investment bank maintains a BUY recommendation with a revised target price of RM0.25, indicating a potential upside of 25.0% from the last traded price of RM0.20.
