Dragged by softer ASP

1QFY26 core earnings below expectations

Stripping out the RM12m forex loss, RM1m inventory write-down, RM11m PPE disposal gain, and RM3m derivatives gain, Hartalega’s 1QFY26 core net profit of RM11m came in below ours and consensus full-year estimates, representing 14% and 8% of the respective forecasts. The earnings shortfall was mainly due to weaker ASP recovery. 1QFY26 revenue fell 5% YoY to RM553m, weighed down by weaker ASP (-5% YoY to US$19-20) and softer sales volume, following front-loaded US inventories and continued pricing pressure in non-US markets.

Lower utilisation rate during the quarter

Hartalega’s utilisation rate declined by 2ppts QoQ to 67% in 1QFY26, in line with weaker glove demand. Sales volume contracted 3% QoQ to 5.9bn pieces (from 6.1bn in 4QFY25), reflecting soft market conditions following earlier front-loading. Nonetheless, management expects a moderate recovery in utilisation rate in the coming quarter, with monthly output expected to rise from 1.9bn to 2.2bn pieces/month in Jul-Sept25, supported by restocking activities, particularly from the US.

Maintain HOLD with lower TP of RM1.34

We revise our FY26-28E earnings downward by 23-45%, reflecting lower ASP assumptions of US$19-21/k pcs (from US$20-22) and reduced sales volume in line with management’s latest guidance of 6-6.5bn pieces. We lower our 12-month TP to RM1.34 (from RM1.64), based on a reduced P/BV multiple of 1.0x (from 1.2x) or -1.5SD below its 3-year historical average. The lower valuation multiple reflects persistent structural challenges and global overcapacity, which are expected to continue weighing on both sales volume and margins, and limit the magnitude of earnings recovery. Upside/downside risks include sales volume, ASP, raw materials trends, sharp appreciation of RM vs. US$, and pricing efforts by Chinese competitors.