KUALA LUMPUR (March 25): Kenanga IB Research has maintained its “Outperform” rating on Hartalega Holdings Bhd at RM6.60 with a higher target price (TP) of RM8 (from RM7) and said year-to-date, the stock is up 21%.
In a note today, the research house said it was still positive and remain bullish on Hartalega’s growth prospect going forward, underpinned by demand uptick with past two quarterly results pointing towards a strong volume growth.
Kenanga said based on its analysis, it expects nitrile gloves to continue growing and grabbing market share from latex gloves.
It said the growth in nitrile segment is evident.
“For illustration purposes, going forward, assuming nitrile:latex breakdown of 80:20 (presently is 67:37) and based on estimated global demand of 324 billion pieces in 2020 (forecast for 2019 is 300 billion pieces and assuming 8% growth rate in 2020), this implies nitrile growth rate of 30% or an additional 51 billion pieces from switch to nitrile gloves.
“Ceteris paribus, a 1% increase in volume sales will raise our FY21E net profit by 1.2%.
“The lacklustre demand in the past 12 months coupled with the importance of higher standards of hygiene reinforced by the outbreak of Covid-19 is expected to ramp up re-stocking activities.
“TP is raised from RM7.00 to RM8.00 based on 48x FY21E EPS. Reiterate Outperform,” it said.
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