Hartalega may face competitive pressure over next two quarters
KUCHING: Hartalega Holdings Bhd ( Hartalega) may face competitive pressure over the next two quarters but analysts also expect the group’s sales volume to be better sequentially.
From its channel checks, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) gathered that competition in the nitrile gloves segment has intensified leading to pressures on average selling prices (ASPs).
“Note that generally, rubber glove ASPs had risen by an average of 25 per cent since end 2016,” Kenanga Research said.
“As such, coupled with the moderating demand and in anticipation of new capacities rampups, we would not be surprised if ASPs come under further pressure over the next two quarters.”
However, the research arm of Maybank Investment Bank Bhd ( Maybank IB Research) noted that sales volume could be better sequentially as Hartalega has secured sales orders for the three new lines it had commissioned recently at Plant 5.
“Upon the full commencement of Plant 5 by March 2019, Hartalega’s capacity would increase to 32.5 billion pieces, up 17 per cent,” Maybank IB Research said.
“From our channel checks, the other glove players are still seeing resilient sales orders or ASPs, hence, we think the global glove demand- supply could still be balanced.”
Meanwhile, Kenanga Research expected contributions from Plant 5 to drive financial year 2019 (FY19) earnings growth.
“Once completed, Plant 5 is expected to boost additional capacity by 14.5 per cent to 37.2 billion pieces per annum.
“All in, Plant 5, 6 and 7 will add a total capacity of 12.1 billion pieces, raising installed capacity by 27 per cent to 44.6 billion pieces per annum.”