Hartalega’s FY12 results were within expectations. There was
minimal movement in both its revenue and net profit from a q-o-q perspective.
Nevertheless, on a YTD basis, both its revenue and net profit were higher,
thanks to the higher selling price of gloves and higher production capacity, in
spite of higher nitrile latex price, higher fuel cost and more competitive
pricing that resulted in some margin erosion.
Maintain Buy with a FV of RM9.39 based on a FY13 PER of 15x.
Within expectations.
The FY12 results were within consensus and our expectations, making 99% and 97%
of the respective FY12 forecasts. Overall, the 4QFY12 results were quite
consistent on a q-o-q
basis, with its revenue of
RM240.2m and net profit of RM50.0m
seeing marginal declines of -0.7% and
-1.4% respectively. Nevertheless, on a YTD comparison, its
full-year revenue of RM931.1m was up by
26.7%, mainly attributed to the higher selling price of gloves and higher production
capacity. Despite the higher percentage
point increase in revenue Its YTD net profit
of RM201.7m was only up by 6.1% owing to higher nitrile latex price,
higher fuel cost and more competitive pricing that resulted in some margin
erosion.
Production capacity
expansion proceeds as planned. Plant 6, which had begun construction in Feb
2012, expects its first production line to be operational by Aug 2012. In
total, the plant will have 10 production lines and it expects to contribute
3.5bn pieces p.a. or a 30% increase to its current production
capacity of around 9.0bn pieces p.a. Having
said that, this bullish expansion was
premised on the expectation
that demand growth for nitrile gloves
will be sustained at 20% p.a. and there will be minimal price war in the global
market.
Maintain Buy. Our
fair value for Hartalega remains unchanged at RM9.39 based on the existing PER
of 15x FY13 EPS. Also, the company had earlier
announced a 1:1 bonus issue and 1:5 free warrants and if we were to take
into account of the resulting dilution, our revised fair value would be
adjusted to RM4.25. All in all, we
continue to like the company for its pole position in the global production of
nitrile gloves.
Source: OSK188
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