KUALA LUMPUR (Dec 28): Affin Hwang Capital Research has donwgraded Hartalega Holdings Bhd to “Sell” at RM10.78 with a higher target price of RM9.30 (from RM7.20) due to its demanding valuation,  and said the stock is trading above +2 stdev of its historical mean even at its revised target price of RM9.30.

In a note today, the research house said there is no doubt that Hartalega will benefit from the ongoing glove shortage, but that it would be challenging for it to deliver a similar more than 50% growth rate in FY19E, as it is already running at full capacity, and that margin expansion would not be as significant as in FY18E.

“We prefer Top Glove Corp Bhd for exposure to the rising glove demand, due to its cheaper valuations.

“The biggest risk to our investment thesis on Hartalega would be even stronger-than-expected demand for gloves, due to the blanket ban on vinyl glove manufacturing in China,” it said.