Hartalega’s gloves’ ASP, sales volume to improve in upcoming quarters

KUCHING: Hartalega Holdings Bhd’s (Hartalega) gloves’ average selling price (ASP) and sales volume has been projected to improve in the upcoming quarters, on the back of the Covid-19 pandemic.

AmInvestment Bank Bhd (AmInvestment Bank) recapped that demand for gloves has picked up strongly as the Covid19 pandemic persists.

“Hence we expect Hartalega’s gloves’ ASP and sales volume to improve in the upcoming quarters,” the research firm said.

The research firm estimated that the group’s net margins will expand by more than three percentage points to around 18 to 19 per cent before contracting in financial year 2022 (FY22F) as the pandemic subsides and demand tapers.

Overall, AmInvestment Bank continued to like Hartalega for the group’s long-term prospects underpinned by capacity expansion, product innovation and superior operating efficiencies.

“We believe the group will benefit from the Covid19 pandemic as we expect the industry-wide capacity expansion will be met with increased glove demand.

“However, we believe that the demand for gloves will immediately taper after the outbreak has been contained.”

Meanwhile, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) highlighted that market consensus is under-appreciating the potential impact from higher-than-expected ASPs in this continuing pandemic and tight supply condition.

“Due to the tight supply, we expect buyers to more aggressively secure allocations which will push up ASPs,” Kenanga Research said.

“Longer delivery lead times are indicating that demand will outstrip supply at least over the medium-term.”

The research arm believed Hartalega will benefit from the robust demand which has led to industry longer delivery lead times which has risen to an average of between 120 to 150 days as compared to 40 to 50 days normally.