RESULTS UPDATE
Wednesday, August 06, 2025
FBMKLCI: 1,538.64
Sector: Healthcare
Hartalega Holdings Berhad
Volumes to Recover Gradually
Review
- Hartalega’s IQFY26 net profit of RM12.6mn accounted for 18.4% of our full-year forecast and 9.2% of consensus estimates. However, we consider the results within expectation and look forward to stronger volumes in upcoming quarters.
- IQFY26 net profit declined by 60.5% YoY mainly due to lower ASP of 5% and volumes of 1.7%, resulted from front-loaded inventories held by US customers as well as deferred orders in response to ongoing tariff development. Note that exports to the North America region accounted for 55.8% of IQFY26 revenue. Additionally, Chinese manufacturers dump their gloves in the non-US markets, resulting in a lower ASP.
- QoQ, IQFY26 PBT declined by 18.8% to RM14.3mn, while revenue fell 9.6% to RM553.1mn. The softer performance was primarily attributed to the strengthening of Ringgit, a decline in ASP of approximately 4% and a 3.3% drop in sales volume. Overall, the utilisation rate for IQFY26 decreased to 67%, compared to 69% in 4QFY25.
Impact
- We fine-tune our FY26-28 earnings projections higher by 1.9% to 6.3% after incorporating the audited FY25 accounts into our forecast.
Outlook
- Looking ahead to 2QFY26, we anticipate Harta’s sales volume to grow by 12-18% QoQ, as some customers have resumed orders following the depletion of excess inventory. This volume recovery is expected to help offsetting the impact of a relatively flat ASP of around USD21 per 1,000 gloves, amid ongoing price competition. Notably, management highlighted that the price differential between the US and non-US markets remains at USD2-3 per 1,000 gloves.
- In terms of operational optimisation, the group has reduced its workforce from 7,559 in March 2025 to approximately 6,300 currently, with a target to further rightsize to 5,300. Concurrently, the group is refurbishing older plants and investing in new technologies to enhance productivity and cost efficiency. As a result, we anticipate margin improvement in the coming quarters.
- Separately, on 4 August 2025, the IRB issued a notice of additional assessments against Hartalega totalling RM101.4mn, relating to the Years of Assessment from 2017 to 2022. The group is currently evaluating its legal options. We note that Hartalega’s cash and short-term investments stood at RM995.8mn as of June 2025.
Valuation
- We reiterate Hold on Hartalega with a TP of RM1.42/share based on I.Ix FY26 P/B and 3% ESG premium.
Table 1: IQFY26 Results Analysis (RMmn)
| FYE Mar 31 (RM mn’) | IQFY25 | 4QFY25 | IQFY26 | QoQ (%) | YoY (%) |
|---|---|---|---|---|---|
| Revenue | 583.8 | 611.5 | 553.1 | (9.6) | (5.3) |
| EBITDA | 56.5 | 42.5 | 41.2 | (3.0) | (27.0) |
| Depreciation & Amortisation | (34.2) | (40.8) | (40.5) | (0.8) | 18.6 |
| EBIT | 22.3 | 1.7 | 0.7 | (57.1) | (96.8) |
| Net finance cost | 11.2 | 7.8 | 6.9 | (11.4) | (38.3) |
| PBT | 41.1 | 17.6 | 14.3 | (18.8) | (65.2) |
| Taxation | (9.2) | (3.0) | (2.0) | (34.4) | (78.4) |
| MI | 0.0 | (0.1) | 0.3 | >-100 | >100 |
| Net profit (-MI) | 31.9 | 14.5 | 12.6 | (12.9) | (60.5) |
| Reported EPS (sen) | 0.9 | 0.4 | 0.4 | (11.9) | (60.6) |
| DPS(sen) | 0.0 | 0.0 | 0.0 | nm | nm |
| Margins | %-points | %-points | |||
| EBITDA margin (%) | 9.7 | 6.9 | 7.5 | 0.5 | (2.2) |
| PBT margin (%) | 7.0 | 2.9 | 2.6 | (0.3) | (4.5) |
| Tax rate (%) | 22.4 | 17.2 | 13.9 | (3.3) | (8.6) |
| Net profit margin (%) | 5.5 | 2.4 | 2.3 | (0.1) | (3.2) |
Table 2: Earnings Summary (RMmn)
| FYE Mar 31 (RM mn’) | FY24 | FY25 | FY26F | FY27F | FY28F |
|---|---|---|---|---|---|
| Revenue | 1,838.1 | 2,585.6 | 2,553.8 | 2,707.4 | 2,861.7 |
| EBITDA | 114.3 | 156.5 | 226.4 | 278.7 | 291.8 |
| Depreciation & amortisation | (128.8) | (148.5) | (162.1) | (164.4) | (166.6) |
| PBT | 38.5 | 47.9 | 94.8 | 142.3 | 150.9 |
| Taxation | (18.7) | 26.5 | (20.8) | (31.2) | (33.1) |
| MI | (7.3) | 0.1 | (1.2) | (1.8) | (1.9) |
| Net profit (-MI) | 12.5 | 74.5 | 72.9 | 109.4 | 116.0 |
| EPS (sen) | 0.4 | 2.2 | 2.1 | 3.2 | 3.4 |
| EPS growth (%) | (105.3) | 496.3 | (2.3) | 50.2 | 6.0 |
| PER (x) | 362.0 | 60.7 | 62.1 | 41.4 | 39.0 |
| DPS (sen) | 0.4 | 11.4 | 1.3 | 1.9 | 2.0 |
| Dividend yield (%) | 0.3 | 8.6 | 1.0 | 1.5 | 1.5 |
ESG Scoring & Guideline
| Environmental | Social | Governance | Average | |
|---|---|---|---|---|
| Scoring | ★★★★ | ★★★★★ | ★★★★ | ★★★★ |
| Remark | Surpassing the requirements set by the Malaysian Department of Environment and has established Key Performance Indicators to continuously assess the progress. | Safeguard its employees very well and strictly adhere to Malaysian labour laws and regulations. | Highly transparent on ESG initiatives, business and directors’ remuneration. |
★★★★★ (≥80%): Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions. +5% premium to target price
★★★★ (60-79%): Above adequate integration of ESG factors into most aspects of operations, management and future directions. +3% premium to target price
★★★ (40-59%): Adequate integration of ESG factors into operations, management and future directions. No changes to target price
★★ (20-39%): Have some integration of ESG factors in operations and management but are insufficient. -3% discount to target price
★ (<20%): Minimal or no integration of ESG factors in operations and management. -5% discount to target price
Sector Recommendation Guideline
- OVERWEIGHT:
- The total return of the sector, as per our coverage universe, exceeds 12%.
- NEUTRAL:
- The total return of the sector, as per our coverage universe, is within the range of 7% to 12%.
- UNDERWEIGHT:
- The total return of the sector, as per our coverage universe, is lower than 7%.
Stock Recommendation Guideline
- BUY:
- Total return of the stock exceeds 12%.
- HOLD:
- Total return of the stock is within the range of 7% to 12%.
- SELL:
- Total return of the stock is lower than 7%.
- Not Rated:
- The company is not under coverage. The report is for information only.
Total Return of the stock includes expected share price appreciation, adjustment for ESG rating and gross dividend. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting.
Total Return of the sector is market capitalisation weighted average of total return of the stocks in the sector.
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
As of Wednesday, August 06, 2025, the analyst, Tan Kong Jin, who prepared this report, has interest in the following securities covered in this report: (a) nil
