Hartalega Holdings (Company Update): Efficiently automated, pedestrian growth for next 12 months

Stock Name: HARTA
Company Name: HARTALEGA HOLDINGS BHD

Research House: ECMLIBRA

Price Call: HOLD

Target Price: 7.82

HOLD, TP: RM7.82

We came back from a visit to Hartalega Holdings (Hartalega) feeling positive on its longer term prospects but expect pedestrian growth in FY13. We like Hartalega because:

(i) its 'highly automated production processes' model is moving from 'good' to 'great' as they are head and shoulders above its peers in terms of better margins, solid improvement in production capacity and reduction in costs;

(ii) offers superior quality nitrile gloves through product innovation; and

(iii) nitrile gloves segment is booming.

The stock is trading at 13.4x CY12 and 12.2x CY13 EPS, compared to average net profit growth of 8%. Recommend a HOLD with TP RM7.82 based on 13x CY12 EPS of 60.2 sen, 18% above its historical average due to its superior margins. (refer to report for details)

Source: ECM Newz Bits 12 March 2012, Full PDF Report