KUALA LUMPUR (May 8): Hartalega Holdings Bhd shares fell as much as 19 sen or 3.76% so far today to RM4.86 after the nitrile glove manufacturer reported yesterday that fourth quarter (4QFY19) net profit dropped to RM91.36 million from RM116.65 million a year earlier.
Net profit for financial year ended March 31, 2019 (FY19), however, rose to RM456.2 million from RM438.92 million a year earlier. Today, CIMB Research said Hartalega's FY19 net profit at RM456.2 million was below expectations, at 93% of CIMB's and consensus full-year forecast.
"We attribute this to the weaker-than-expected results in 4QFY19," CIMB analyst Walter Aw wrote in a note.
"Given the weak 4QFY19 results, we cut our FY20-21F EPS (earnings per share) by 13.7-15.1%. This is to account for: i) lower sales volume, ii) a reduction in glove selling prices, and iii) higher tax rates," he said.
Aw said that in tandem with CIMB's Hartalega EPS forecast cut, the research house lowered its target price for Hartalega to RM4.80 from RM5.40.
"Our hold call remains on the back of expectations of a decline in share price post the release of its weak 4QFY19 results. Despite near-term competition in the nitrile glove space, we think Hartalega's robust long-term structural growth story remains intact and has been fairly accounted for at current share price levels," he said.
At 10:41am, Hartalega shares cut losses at RM4.99 with 2.49 million units traded. The stock was trading between RM4.86 and RM5.02 so far today.