Harta: Earnings Shot Up!!

Result Update

For QE30/9/2017, Harta's net profit rose 18% q-o-q or 59% y-o-y to RM113 million while revenue was mixed - down 3% q-o-q but up 34% y-o-y - to RM585 million. Revenue dropped q-o-q mainly due to lower average selling price arising from more competitive pricing but the sales volume increased by 5.2% due to increase in demand. PBT rose q-o-q mainly due to lower nitrile and latex cost, lower chemical cost and improvement in operation efficiency.


 Table: Harta's last 8 quarterly results


Graph: Harta's last 40 quarterly results

Valuation

Harta (closed at RM10.68 last Friday) is trading at a trailing PER of 48 times (based on last 4 quarters' EPS of 22.21 sen). At this PER, Harta has surpassed Nestle in term of trailing PER. At RM103.20, Nestle's trailing PER is now at 42 times!

Technical Outlook

Harta broke above a upward "Cup with handle" formation at RM7.80. Assuming a 1-to-1 extension, Harta should reach a high of RM10.20. Well it did better than that. It overshot the RM11.00 before correction set in. How long will correction last? Only time will tell.


Chart: Harta's weekly chart as at Dec 29, 2017 (Source: Malaysiastock.biz)

Conclusion

Based on improved operating performance, strong leadership in the glove sector and capable management team, Harta is considered a good stock for long-term investment. Its rating is kept at HOLD due to its demanding valuation.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.