Hartalega Likely to Face Earnings Pressure

Dow Jones10:32

0232 GMT - Hartalega is likely to post a sequentially flattish fiscal 3Q earnings report, with weaker 4Q to follow as lower Brent crude prices and higher natural gas costs weigh on margins, Hong Leong IB analyst Chee Kok Siang says in a note. Lower oil prices could prompt selling price reductions from December, while it continues to use higher-cost nitrile butadiene rubber inventories purchased earlier, creating a lag in cost savings and squeezing margins, he says. Further oil price moderation into 1Q 2027 and an expected 10% natural gas tariff hike could add to the earnings pressure in 4Q, he says. Hong Leong downgrades Hartalega's rating to sell from hold on persistent structural oversupply risks and cuts target price to 0.80 ringgit from 0.97 ringgit. Shares are unchanged at 1.06 ringgit.

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