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MALAYSIA

INVESTMENT RESEARCH REPORT

KDN PP13226/04/2013 (032022) JF APEX SECURITIES BERHAD(47680-X)

Please read carefully the important disclosures at end of this publication

Result

Hartalega registered RM247m and RM62.9m of revenue and netprofit respectively in its 1QFY2014. On a yoy basis, top line grew12.2% while net earnings rose 17.8%.

The results were in line with ours and consensus

expectations as we foresee stronger quarters ahead followingthe full completion of the Plant 6 in July 2013. We areforecasting revenue and net earnings growth of 27% and 19%respectively in FY2014 and we believe that Hartalega is well on

track to achieve our target.Comments

Sales growth remained strong with the Group sold 23%more rubber gloves as compared to the same period last year.Hartalega was able to capitalize on the robust demand growth inthe nitrile market thanks to the extra capacity from the Plant 6,which in total boosted the Groups production capacity by 3.9billion pcs per annum to c.13 billion pcs per annum.

1QFY2014 operating profit rose 17% yoy, partly due tothe higher operating efficiency with higher production speedas a result of the completion of the all 10 new production lines in

Plant 6. Besides, the declining raw material prices have alsocontributed to the expansion in operating margin to 29.5% from28.3% a year ago.

Focus on the next phase on growth will be shifted toNext Generation Integration Glove Complex (NGC) sincethe current land in Bestari Jaya is fully occupied following thecompletion of Plant 6. As the continuing demand switch to nitrilegloves has attracted other peers to ramp up their nitrile capacityaggressively, the progress of the construction of NGC will be vitalas the Group is looking to fend off future competition.

Earnings Outlook/Revision

We are keeping our earnings forecast unchanged as theresults were within our expectation in view of the strongerquarters ahead.

Valuation & Recommendation

Maintain HOLD with a revised Target Price of RM6.76(from RM6.00) We are ascribing a higher PER of 17.8x to thestock, which is close to its +2SD above 5-year mean. However,the stock is fully valued in our point of view following theoverwhelming YTD performance.

We reckon that the premium valuation is justified in view of itsmarket capitalization of RM5b, which is the largest among its

peers. Besides, we are also positive on Hartalegas ability tomaintain its position as the most efficient glove maker bysustaining its impressive earnings margins.

Company Result 7 August 2013

Hartalega Holdings Berhad HOLDOff to a good start MaintainedShare Price RM6.79Target Price RM6.76

Company DescriptionHartalega Holdings Bhd. manufactures a widerange of latex gloves. The Company'sproducts include natural rubber examinationgloves, nitrile examination gloves, nitrile cleanroom gloves and natural rubber surgicalgloves.

Stock DataBursa / Bloomberg code 5168 / HART MK

Board / Sector Main / Industrial

Syariah Compliant status Yes

Issued shares (m) 738.9

Par Value (RM) 0.50

Market cap. (RMm) 5017.1

52-week price Range(RM) 4.21-6.85

Beta (against KLCI) 0.71

3-m Average Daily Volume 0.79m

3-m Average Daily Value^ RM4.88m

Share Performance

1m 3m 12mAbsolute (%) 4.62 6.09 50.89

Relative (%-pts) 3.90 24.03 37.91

Major Shareholders %Hartalega Industries SB 50.2EPFBudi Tenggara Bhd

6.14.9

Historical Chart

Source: Bloomberg

Soong Wei Siang

03-87361118, ext. 754research.dept@jfapex.com.my

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7 August 2013 Company Result Hartalega Holdings Berhad JF APEX SECURITIES

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Quarterly figures

Source: Company, JF Apex

Financial Summary

Year Ending 31 Mac FY2012 FY2013 FY2014F FY2015F FY2016F

Revenue (RM'm) 931.1 1032.0 1312.5 1482.3 1699.4

EBITDA (RM'm) 290.7 338.7 451.7 490.5 544.8

Operating profit (RM'm) 261.7 306.8 386.7 432.9 484.8

Net profit (RM'm) 201.7 235.1 279.8 326.0 366.4

EPS 0.27 0.32 0.38 0.44 0.50

P/E (x) 24.7 17.0 17.8 15.3 13.6

Dividend yield 1.3% 2.6% 2.5% 2.9% 3.3%

EBITDA margin 31.2% 32.8% 34.4% 33.1% 32.1%

PBT margin 27.8% 29.6% 27.3% 28.2% 27.6%

Net profit margin 21.7% 22.8% 21.3% 22.0% 21.6%

Source: Company, JF Apex

Year Ending 31 Mac 1QFY14 4QFY13 1QFY13Q-o-Q(%)

Y-o-Y(%)

Revenue (RMm) 278.0 269.8 247.7 3.0% 12.2%

Operating Profit (RMm) 82.0 81.5 70.2 0.6% 16.8%

PBT (RMm) 81.9 81.3 69.9 0.7% 17.2%

Net Profit (RMm) 62.9 62.3 53.4 1.0% 17.8%

EPS(sen) 8.6 8.5 7.3 1.0% 17.8%

Operating Margin 29.5% 30.2% 28.3% -0.7ppt 1.2ppt

PBT Margin 29.5% 30.1% 28.2% -0.7ppt 1.2ppt

Net Profit Margin 22.6% 23.1% 21.6% -0.5ppt 1.1ppt

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7 August 2013 Company Result Hartalega Holdings Berhad JF APEX SECURITIES

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JF APEX SECURITIES BERHAD CONTACT LIST

JF APEX SECURITIES BHD

Head Office:6th Floor, Menara ApexOff Jalan SemenyihBukit Mewah43000 KajangSelangor Darul EhsanMalaysia

General Line: (603) 8736 1118Facsimile: (603) 8737 4532

PJ Office:15th Floor, Menara Choy Fook OnNo. 1B, Jalan Yong Shook Lin46050 Petaling JayaSelangor Darul EhsanMalaysia

General Line: (603) 7620 1118Facsimile: (603) 7620 6388

DEALING TEAM

Head Office:Kong Ming Ming (ext 3237)Shirley Chang (ext 3211)Norisam Bojo (ext 3233)Wong Wing Haur, Alvin (ext 3226)Tew Li Mei (ext 3288)

Institutional Dealing Team:Lim Teck SengSanusi Bin Mansor (ext 740)Fathul Rahman Buyong (ext 741)

Ahmad Mansor (ext 744)Lum Meng Chan (ext 743)

PJ Office:Mervyn Wong (ext 363)Mohd Hanif Wan Said (ext 111)Fong Jia Wen (ext 822)

RESEARCH TEAM

Head Office:Lee Chung Cheng (ext 758)Lee Cherng Wee (ext 759)Jessica Low Jze Tieng (ext 756)Soong Wei Siang (ext 754)Gabriela Fang Minn Fern (ext 753)Elliya Harisna bt Junaedi (ext 752)

JF APEX SECURITIES - RESEARCH RECOMMENDATIONFRAMEWORKSTOCK RECOMMENDATIONS

BUY : The stocks total returns* are expected to exceed 10% within the next 12 months.

HOLD : The stocks total returns* are expected to be within +10% to 10% within the next 12 months.

SELL : The stocks total returns* are expected to be below -10% within the next 12 months.

TRADING BUY : The stocks total returns* are expected to exceed 10% within the next 3 months.

TRADING SELL : The stocks total returns* are expected to be below -10% within the next 3 months.

SECTOR RECOMMENDATIONS

OVERWEIGHT : The industry as defined by the analyst is expected to exceed 10% within the next 12 months.

MARKETWEIGHT : The industry as defined by the analyst is expected to be within +10% to 10% within the next 12 months.

UNDERWEIGHT : The industry as defined by the analyst, is expected to be below -10% within the next 12 months.

*capital gain + dividend yield

JF APEX SECURITIES BERHAD DISCLAIMERDisclaimer: The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior writtenconsent of JF Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It isnot to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of JFApex Securities Berhad and are subject to change without notice. JF Apex Securities Berhad has no obligation to update, modify or amend thisreport or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forthherein, changes or subsequently becomes inaccurate.

JF Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon suchstatement by anyone shall give rise to any claim whatsoever against JF Apex Securities Berhad. JF Apex Securities Berhad may from time totime have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior writtenapproval of JF Apex Securities Berhad.

Published & Printed By:

JF Apex Securities Berhad(47680-X)(A Participating Organisation of Bursa Malaysia Securities Berhad)