Hartalega Earnings Jump on Higher ASPs, Cost Controls

Hartalega posted stronger-than-expected first-quarter earnings as higher average selling prices and cost optimisation lifted profitability, prompting MBSB Research to raise earnings forecasts, target price and maintain BUY.

Hartalega Lifts Earnings Outlook

Hartalega Holdings Bhd delivered a stronger-than-expected start to FY2027, with first-quarter earnings boosted by higher average selling prices (ASPs), disciplined cost optimisation and improved operational efficiency, prompting MBSB Research to maintain its BUY recommendation while raising its target price to RM1.73.

The research house said Hartalega’s 1QFY27 core profit after tax and minority interests (PATAMI) reached RM72.8 million, exceeding both its own and consensus estimates after accounting for more than half of the full-year earnings forecast. Revenue rose 9.5 per cent year-on-year to RM605.8 million, while reported PATAMI climbed to RM70 million from RM12.6 million a year earlier.

The earnings improvement was mainly driven by higher glove ASPs of about US$26 to US$28 per 1,000 pieces, compared with US$20 to US$21 previously. The stronger pricing offset lower sales volumes and higher nitrile latex costs caused by geopolitical tensions in the Middle East.

Hartalega expects production volumes to increase as Plant 3 gradually resumes operations following automation upgrades. The facility currently has three upgraded lines, with the remaining enhancements expected to be completed by December 2026.

Once fully operational, Plant 3 will add four billion pieces of annual capacity, raising monthly output to about 2.5 billion pieces from the current two billion.

The company also expects further ASP revisions over the coming quarters as raw material costs remain elevated. However, MBSB Research cautioned that second-quarter margins could soften temporarily as higher-cost inventory is cleared amid continued pricing competition from Chinese manufacturers in non-US markets.

Despite macroeconomic headwinds, the research house remains optimistic on Hartalega’s long-term outlook, supported by automation, cost discipline, healthier customer inventories and ESG initiatives.

Following the stronger quarterly performance, MBSB Research raised its FY2027 to FY2029 earnings forecasts by 80 per cent, 73 per cent and 72 per cent respectively, reflecting confidence in the group’s earnings recovery and sustained operational improvements.

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