CIMB upgrades Hartalega, says 1H results in line with forecast

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KUALA LUMPUR (Nov 9): CIMB Research raised its Hartalega Holdings Bhd share target price to RM6.78 from RM6.30, as CIMB rolled over its valuation for the glove manufacturer to end 2019. 

In a note today, CIMB analyst Walter Aw said CIMB maintained its "Hold" rating on Hartalega. 

"A re-rating catalyst for the stock would be higher-than-expected demand for rubber gloves and sharp weakening of [the] ringgit against [the] US$. Upside/downside risks: Weaker-/stronger-than-expected nitrile raw material prices," Aw said.

CIMB issued its note after Hartalega announced its results yesterday for its second quarter ended Sept 30, 2018 (2QFY19).

Aw said today: "Hartalega posted a 2QFY19 core net profit of RM120.2m, bringing 1HFY19 core net profit to RM245.1m. This was in-line and made up 47% of our full-year forecast and 48% of the consensus number."

Meanwhile, Hong Leong Investment Bank Bhd analyst Sheikh Abdullah said Hartalega's 1HFY19 core profit after tax and minority interests (PATAMI) of RM240.2 million was within Hong Leong's expectation, but slightly below consensus estimates.

Sheikh Abdullah said Hong Leong maintained its “Hold” call for Hartalega shares, with an unchanged target price of RM6.12. 

"1HFY19 revenue of RM1,420.6m (+19.8% YoY) translated into core PATAMI of RM240.2m (+13.2% YoY) which came in within ours at 49.5%, but slightly below at 47.4% of consensus full year estimates. Despite the rich valuation, we reckon that our HOLD call is warranted, as share price support will stem from (i) Hartalega being a KLCI stock and (ii) stronger US$ outlook will continue to maintain robust demand for export stocks," he said.