• Hartalega posted a 59.2% Y.o.Y spike in its 2QFY18 net profit to RM113.3 mln, from RM71.2 mln in the same quarter last year – led by higher sales volume and improvement in productivity, coupled with a net foreign exchange gain of RM7.8 mln. Revenue for the quarter also jumped 33.8% Y.o.Y to RM584.6 mln vs. RM437.0 mln last year. Following the stellar results, the group declared a first interim dividend of 3.5 sen per share (from 2.0 sen per share in 2QFY17), payable on 28th December 2017.

• Cumulative 1HFY18 net profit also surged 64.6% Y.o.Y to RM127.4 mln, compared to RM82.3 mln a year earlier, while revenue rose 41.4% Y.o.Y to RM1.19 bln, from RM838.8 mln in 1HFY17. The exceptional growth in its bottomline was attributed to stronger sales contribution, higher operation efficiency and a net foreign exchange gain of RM15.7 mln (from a net forex loss of RM12.0 mln previously). The reported earnings and revenue were within our expectations - accounting to 50.7% of our FY18 estimated net profit of RM418.1 mln and 50.2% of our FY18 revenue of RM2.38 bln.

• Hartalega commissioned five additional production lines in Plant 4 – totaling 86 lines in both its NGC and Bestari Jaya plants. Production rate was maintained at high levels, still above 90.0%, bolstered by resilient demand for nitrile rubber gloves following a shortage in Chinese-made gloves due to China’s environment reforms.

• The group is expected to continue its strong growth (5-year revenue CAGR: 20.6%), driven by higher ASPs, improved operational efficiency and progressive capacity expansion, which will be adequately absorbed by the solid demand in nitrile rubber gloves.

Source: Mplus Research - 8 Nov 2017