Hong Leong Investment Bank Research (HLIB Research) has recommended a 'buy' call on Hartalega Holdings Bhd at a target
price (TP) of RM5.16.

In a note today, HLIB Research said Hargalega has a dominant position in the nitrile glove market and has high return on equity (ROE) and net profit margins.

"In the event of a price war, Hartalega's earnings will be the least affected and the comapny is shielded by its high profit margins," it said.

It said the likely risks, however, were delays in capacity expansion plan, surge in nitrile latex prices and shift in demand to natural latex gloves from nitrile gloves, if prices of natural latex were to fall significantly below nitrile latex.

Meanwhile, HwangDBS Vickers Research Sdn Bhd has maintained a 'hold' call on the company at a higher TP of RM4.80 (from RM4.70) after the earnings revision.

"The current valuation has priced in Hartalega's strong fundamentals, highest ROE and operating margins in the sector," it said in a note today.

HwangDBS Vickers said it has raised Hartalega's financial years 2013/2014 earnings by five/two per cent after inputing higher operating margins (28/27 per cent versus 27/26 per cent previously).

It said the next re-rating catalyst would be the strong earnings traction arising from improving efficiency through deeper research and development efforts and faster line speeds.

Kenanga Research has maintained a 'market perform' call on the company at a lower TP of RM5.12. -- Bernama