KUALA LUMPUR (Nov 13): Hong Leong IB Research (HLIB) has maintained its Hold rating on Hartalega Holdings Bhd with a higher target price of RM7.43 and said the company’s next generation complex’s (NGC) first 2 production lines would commence operation in Nov.
In a note Thursday, the research house said that in total, the NGC will accommodate 6 plants with 72 lines, targeting completion in 2020.
HLIB said lines would be progressively built. Hence, marginal capacity increase in FY15 and capacity boost will come on-stream in FY16 and FY17.
It said Hartalega did not face demand issue, with steady double digit growth, adding that confident in selling off Phase 1 capacity as existing customers have already shown interests.
“Given minimal capacity contribution in FY15 and higher NGC start-up costs, we are expecting weaker FY15 earnings. Nevertheless, earnings will gain momentum once capacity commences in FY16.
“Updated model based on latest capacity guidance. Net adjustment resulted in higher CY16 EPS.
“Maintain Hold with a higher target price of RM7.43 as we roll forward valuation to CY16, pegged to unchanged P/E multiple of 16.2x,” it said.