Hartalega Costs to Rise Amid Natural Gas Tariff Adjustment

Hartalega Holdings Bhd's production costs are expected to rise due to an impending natural gas tariff adjustment from October 2026. The increase in costs may be passed on to customers, but the average selling price (ASP) gains for the company could be limited. Public Investment Bank Bhd noted that local glove makers have seen some stability with the current 10 per cent tariff on Malaysian glove exports to the US remaining unchanged.

However, a recent meeting with Hartalega's management suggests customers are adopting a more measured purchasing behavior, which may reduce the earnings upside for the company. This is due to sufficient inventory levels allowing them to take a wait-and-see approach instead of replenishing stocks quickly. As a result, any earnings uplift from the increased ASPs would likely be less pronounced than during previous supply disruptions.

Despite this cautious demand outlook, Public Investment Bank Bhd still expects Hartalega's first-quarter financial year 2027 (Q1 FY27) results to benefit from stronger ASPs recorded in May and June. The research firm maintained its earnings forecasts for FY27 to FY29 and upgraded the stock to 'Neutral' from 'Underperform' following a recent correction in the company's share price.