Hartalega: BUY, target price unchanged RM10.10

MAYBANK Investment Research has maintained its "Buy" call on Hartalega Holdings Bhd (5168)as it believes the rubber glove maker is resilient enough to withstand price competition.

Analyst Khair Mirza said that Hartalega has superior margins and is expected to meet its forecast of RM42 million net profit in the first quarter.

"We continue to like Hartalega as a resilient healthcare player and believe it could even gain market share should a price war ensue," Khair said in a research note.

The coming quarters could see a price war as glove manufacturers might offer more competitive prices to utilise their nitrile capacity.
"Despite this, we think Hartalega has the operating scale, market share, superior margins (7-18 points premium to peers) and track record to defend against this short- to mid-term setback better than smaller-scale peers/start-ups."

Maybank Investment Research's target price of RM10.10 implies 2011 price-earnings ratio of 12 times, on par with Top Glove Bhd's PER.


- by Business Times