2QFY26 CNP of RM17.9m (+41% QoQ, -63% YoY) brought 6MFY26 CNP to RM30.6m ( -67.3% YoY), missing expectations at 24% of our full-year forecasts and 33% of consensus estimates. The shortfall was mainly due to lower-than-expected sales from the weakening of USD against MYR and soft ASPs driven by supply glut.
We expect HARTA’s performance to remain broadly flat despite forex headwinds, supported by mild ASP recovery and ongoing cost-optimisation efforts.
Following the change in covering analyst, we have revamped our financial model and revised our forecasts for FY26/27/28F to RM68.8/80.5/102.2m, respectively, representing adjustments of -46.6%/-44.9%/-41.6%, respectively, from previous projections.
Maintain HOLD recommendation with a lower target price of RM1.17/share (previously RM1.93) based on a revised 0.9x P/B on FY27F BVPS of RM1.29.
Missed expectations. After adjusting for one-off items (-RM0.4m), HARTA’s 2QFY26 core net profit (CNP) came in at RM17.9m (+41% QoQ, -63% YoY). This brought 6MFY26 CNP to RM30.6m (-67.3% YoY). The results were below expectations, representing only 24% of our full-year forecast and 33% of consensus estimates. The shortfall was mainly due to lower-than-expected sales from the weakening of USD against MYR and soft ASPs driven by supply glut.
Dividend. No dividend declared
QoQ. CNP surged 41% despite a 2.4% decline in revenue, driven by a stronger operating profit of RM13.7m (+78.2%) as ongoing cost optimisation and automation initiatives continued to enhance production efficiency. Notably, labour cost fell 14.3% QoQ, reflecting the Group’s sustained workforce rationalisation efforts. The softer revenue performance was mainly due to the appreciation of the MYR against the USD, which led to a 3.6% decline in blended ASPs in MYR terms, even though USD-denominated ASPs remained largely stable (-0.3% QoQ to c.USD21/1k pcs). Consequently, the Group achieved an operating margin expansion of 0.9 ppts QoQ to 2.5%.
YoY/YTD. CNP plunged 63% YoY and 67.3% YTD, mainly attributed to a 17.2% YoY and 11.6% YTD decline in revenue. The weaker topline was driven by lower sales volume and the appreciation of the MYR against the USD, which reduced MYR-translated export sales. On a YoY basis, sales volume contracted by 13% amid heightened pricing competition and softer demand from non-US markets, while MYR-denominated ASPs slipped 5% due to currency headwinds. These factors outweighed the benefits of ongoing cost-optimisation efforts, resulting in weaker profitability. Nevertheless, including forex gains/losses, operating profit improved significantly, turning from a loss to a profit YoY and rising 171% YTD, as 2QFY25 was previously affected by substantial foreign-exchange losses on USD-denominated assets following a sharp appreciation of the MYR against the USD in the quarter.
Outlook. Global glove demand is gradually recovering, with demand in 2H2025 expected to grow about 4% YoY as inventory destocking concludes and healthcare usage normalises. However, persistent industry oversupply continues to weigh on pricing. Chinese producers are expanding into Southeast Asia under a “China + 1” strategy to mitigate tariff exposure, although these moves appear reactive rather than reflective of genuine demand recovery. Management guided that the blended ASP in 3QFY26 is likely to remain flattish, with a risk of marginally lower pricing despite slight adjustments for a weaker USD in the next quotation cycle. The ability to pass through forex headwinds remains limited under current market conditions. Overall, we expect HARTA’s near-term performance to stay broadly flat QoQ, supported by mild ASP recovery and ongoing cost-optimisation efforts, while a sector re-rating is unlikely until industry capacity normalises and pricing power improves.
Earnings Revision. Following the change in covering analyst, we have revamped our financial model and revised our forecasts for FY26/27/28F to RM68.8/80.5/102.2m, representing downward adjustments of -46.6%/-44.9%/-41.6%, respectively, from previous projections. The downward revision primarily reflects a slower-than-expected recovery in sales, driven by the weaker USD against the MYR and soft ASPs amid persistent supply glut. In tandem, we have adjusted our USD/MYR assumptions for FY26/27/28F from 4.35/4.25/4.25 to 4.20/4.15/4.15 to align with our in-house macro projections.
Valuation. We maintain our HOLD recommendation, albeit with a lower target price of RM1.17/share (from RM1.93), based on a revised 0.9x P/B multiple (from 1.5x) after rolling forward our valuation base year to FY27F. Our assigned P/B multiple is 1SD below its 5-year forward mean, which we believe is justified given the challenging sector outlook. Chinese glove manufacturers continue to expand capacity into Southeast Asia to mitigate US tariff exposure, exacerbating the existing supply glut, while foreign-exchange headwinds further cloud the earnings outlook.
Risk. Increase in raw material prices, weakening of USD against MYR, policy changes such as US tariffs.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.097077 | 4.130856 |
| EUR | 4.800240 | 4.806405 |
| CNY | 0.581645 | 0.582383 |
| HKD | 0.526592 | 0.530422 |
| SGD | 3.164464 | 3.187623 |