Q3 report has recorded an increase of RM 73.1 mil or 10.1% on the group's sales revenue compared to corresponding quarter in preceding year. In the report explained that the higher sales revenue was due to increase in sales volume of 17.4%.
PBT also improved 6.5% compared to corresponding quarter in preceding year from RM 150 mil to RM 159.7 mil mainly due to higher sales volume recorded during the current quarter. It was tallied to the increase in company's inventories recorded in Q2 report.
Year to date, The Group achieved sales revenue of RM 2.146 billion, increased by RM 2.0 million or 0.1% from RM 2.144 billion recorded in corresponding period in preceding year. The higher sales revenue reported was mainly due to higher sales volume.
Profit before tax however eased by RM 19.5 million or 4.5% to RM 418.6 million as compared to RM 438.1 million in corresponding period in preceding year. The lower reported profit before tax was mainly due to lower average selling price and higher natural gas and R&D expenses.
Q3 FY2020 vs Q2 FY2020
Revenue for the quarter amounted to RM 796.5 million, increased by RM 87.1 million or 12.3%. The higher sales revenue was attributed to higher sales volume for the quarter. Sales volume increased by 12.9%.
Profit before tax for the quarter increased by RM 22.3 million or 16.3% to RM159.7 million as compared with previous quarter mainly due to increase in sales volume and lower nitrile, chemicals, labour and electricity cost.
Inventories has reduced by 8% from RM 303 mil from preceding quarter to RM 276 mil. Cash & cash equivalents also slightly reduced compared to preceding quarter.
Total borrowing has reduced from RM 343.9 mil to RM 253.4 mil by 26%.
Comment:
Fundamental Analysis
As I explained earlier in Q2 review, sales orders for glove sectors will be locked in for around three months before the delivery of goods. Hence, from Q2 report I anticipated that increase in inventories was to prepare for orders secured and to be delivered in Q3. The increase in EPS was above my expectation as previous review I gave a 3.24sen EPS for Q3.
In current quarter, inventories has reduced compared to preceding quarter. We might see a slower growth in revenue in Q4 FY20. However, the recent on going coronavirus outbreak might boost up the group sales volume due to stronger demand on glove products.
PBT for current quarter is not picking up with the revenue growth due to lower gross margin (19%) compared to preceding year with an overall gross margin of 22%.
I anticipate that Q4 sales orders will still remain strong. Moreover, due to recent reduction in electricity cost on ICPT, a similar profit could be achieved in coming quarter. Hence, I estimate that the Q4 EPS could be maintained as 3.6sen by giving FY EPS to 12.99sen.
By taking current PE of 49 or PE 38 (a year earlier) with a 30% growth. The TP would be RM6.36 - 6.63.
Technical Analysis
Harta is in a major bullish trend, currently it is having a 3rd motive wave. I will continue to hold on my stocks to swim with the wave until the end.
