Thursday, May 11, 2017

Results Note - Hartalega (BUY, upgrade)

Top Calls

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.

For important disclosures, please refer to the Disclosure section at the end of the individual linked research reports.

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