Nnitrile gloves’ ASP increase for Hartalega may exceed 40 per cent
KUALA LUMPUR: The sequential increase in Hartalega Holdings Bhd’s (Hartalega) average selling price (ASP) for nitrile gloves could possibly exceed 40 per cent compared to the current quarter, analysts project.
To recap, Hartalega’s net profit for the third quarter of financial year 2021 (3QFY21) hit RM1 billion, up 83.8 per cent quarter on quarter (q-o-q), while revenue increased by 58.2 per cent q-o-q to reach RM2.13 billion.
“The surge in revenue was attributed to the increase in ASP of nitrile gloves, which we estimated at more than 50 per cent sequentially as well as higher volume sold,” the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said in its 3QFY21 review on Hartalega.
“In-line with the industry trend, we think that ASPs for nitrile gloves are likely to continue its upward trajectory for the quarter ending March.
“As Hartalega has been lagging in price adjustments compared to some of its peers, we believe that the sequential increase in ASP could possibly exceed 40 per cent compared to the current quarter.”
According to MIDF Research, based on channel checks, supply remains tight for rubber gloves.
“On top of the demand from combating the Covid-19 pandemic, increasing demand is seen in emerging markets with low gloves consumption per capita due to higher hygiene awareness.”
On Hartalega’s expansion plan, MIDF Research gathered that the group has completed all the 12 production lines in Plant 6 of Next Generation Complex (NGC).
“Meanwhile, four out of 10 lines in Plant 7 have been commissioned.”
The research arm also gathered that another two more lines at Plant 7 are to be commissioned by end of FY21 while the remaining four lines, which are allocated for surgical gloves will be installed in the coming quarters.
It noted that separately, Plant 8, which is part of NGC 1.5, is slated for the commissioning of its first line by 4Q of current year 2021 (4QCY21).
“With all these plans in place, we think that the full completion of NGC 1.0 may pave way for the start of NGC 2.0 in 2022.”
All in, MIDF Research increased its earnings forecast for FY21E by 49 per cent in anticipation of further upside on ASPs, which in turn will drive up revenue and profit.
The research arm believed that the increase in ASP will offset higher raw material costs.