Results Note - Hartalega
(BUY, upgrade)
- Shifting into high gear
Hartalega's 4QFY17 core net profit rose by a strong
35% qoq to RM89m, underpinned by firmer sales volume, tailwinds from the weak
Ringgit, and improved operational efficiencies in spite of higher raw
material prices. We are upgrading Hartalega to BUY as we believe its margin
decline is nearing a trough on normalising competition and improvements in
operational efficiencies. We forecast an FY18-20 earnings CAGR of 19%,
underpinned by capacity expansion and strong emphasis on cost management. We
lift our 12M TP to RM6.30, after rolling forward valuations to CY18 and
raising our target PER to 24x (from 22x), in line with the 3-year mean.
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