Hartalega’s prospects over next few quarters in FY21 garners excitement

KUCHING: Hartalega Holdings Bhd’s (Hartalega) prospects over the next few quarters in financial year 2021 (FY21) has garnered excitement from analysts, given that demand will be strong with industry average selling price (ASP) higher on a weekly and monthly basis.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), industry trend of rising weekly and monthly ASP is expected to boost bottom-line.

“We are excited with Hartalega’s prospects over the next few quarters following the fourth quarter of FY20 (4QFY20) results’ briefing,” Kenanga Research said.

“It is confident of visibility till end December 2020. Specifically, industry trend of higher weekly and monthly ASP is expected to boost bottom-line.

“Generally, industry allocations for the next few quarters have been taken up which augur well for Hartalega.”

“For illustration purposes, ceteris paribus, since industry ASP is three to five per cent higher on a quarter on quarter (q-o-q) and week-on-week basis, q-o-q earnings can only be higher exponentially.”

As such, Kenanga Research highlighted that market consensus is still underappreciating the potential impact from higher-than-expected ASP in this continuing pandemic and tight supply condition.

Due to the tight supply situation, the research arm expected buyers to jockey for position in order to secure allocation which will push up ASP.

“Personal Protective Equipment (PPE) of which glove is one of the components is presently much sought after, creating scarcity amid limited supply.

“The group will give priority to its existing customers which are major distributors.”

Kenanga Research believed Hartalega will benefit from robust demand as demonstrated by the industry’s longer delivery lead times (the moment order is placed to delivery) which has risen to an average of between 150 to 250 days as compared to 40 to 50 days normally.

“However, we are bullish on higher ASP as buyers continue jockeying to secure order allocations.”

Hartalega’s prospects over the next few quarters in FY21 has garnered excitement from analysts, given that demand will be strong with industry ASP higher on a weekly and monthly basis.