Results Highlights

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Hartalega’s 2QFY17 net profit gained 17.9% Y.o.Y to RM71.2 mln, from RM60.4 mln in the previous corresponding period, in-tandem with the stronger revenue contribution - mainly due to greater operational efficiency which improved margins. Quarterly revenue also rose 15.2% Y.o.Y to RM437.0 mln vs. RM379.3 mln in 2QFY16.

Cumulative 1HFY17 net profit was up marginally by 3.5% Y.o.Y to RM127.4 mln against RM123.1 mln in the previous corresponding year, while revenue rose 19.9% Y.o.Y to RM838.8 mln, in comparison to RM699.9 mln in 9MFY16. The reported earnings were slightly below our expectations, accounting to 44.5% of our full year estimated net profit of RM286.5 mln. However, the reported 1HFY17 revenue came within our expectation as it accounts to 50.8% of our full year revenue of RM1.65 bln.

Hartalega is operating at an average utilisation rate of 88.0% in 2QFY17, improving from the 81.0% utilisation rate registered in FY16 – led by a stronger demand, as well as the commencement of Plant 1 & 2 of the NGC. We also saw the normalisation of Hartalega’s ASPs as well as lower overhead costs, although Hartalega’s 2QFY17 EBITDA margin fell slightly to 23.0%, from 24.1% in the previous corresponding quarter, largely due to a hike in cost of goods sold.

On the bottom line, 2QFY17 net margin expanded to 16.3% (vs 15.9% in 2QFY16), mainly due to the fall in depreciation charges to RM16.9 mln, from RM17.1 mln previously, while the company’s net gearing remained relatively low around the 10% level, underlining the management’s prudence in maintaining a strong balance sheet whilst in the midst of its expansion plans

Source: Mplus Research - 9 Nov 2016