📌 $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) Profitability Risk in 2H2025

HARTA has *not explicitly stated* that it will incur losses in the *second half of 2025*, but the following key factors could *put pressure on profitability*, potentially leading to *losses*:

🔍*Key Risk Factors*

1️⃣ *Order Decline: Short-Term Demand Weakness*

- Due to *frontloading*, some customers have *already stocked up* large inventories.
- *New orders may only resume in April or May 2025*.
- *1QFY26 (April–June 2025)* could still *face weak order flow*, impacting *revenue growth*.

2️⃣ *Decline in Plant Utilization*

- 3QFY25 utilization rate: *86%*
- 4QFY25 expected utilization rate: *70-75%*⚠️
- Lower utilization means *reduced production efficiency* and *higher fixed cost allocation*, which could *impact profitability*.

3️⃣ *ASP (Average Selling Price) Pressure*

💰 Current ASP:
- *US market: USD21/carton*
- *Non-US market: USD18-19/carton*
- *Chinese manufacturers’ ASP (Non-US market): USD15/carton*
⚠️ If *ASP fails to increase further, profit margins may continue to be compressed*.

4️⃣ *Rising Costs*

📈 *Minimum wage increase*: *+USD0.20/carton*, adding cost pressure.
🛢 *Raw material costs will not decline*:
- Upstream suppliers rationalizing capacity, meaning prices may remain stable or rise.

5️⃣ *Exchange Rate & Hedging Impact*

💵 HARTA’s current hedging rate: RM4.3/USD1
⚠️ *If MYR strengthens further, export profitability may be affected*.

6️⃣ *Intensifying Competition*
🇨🇳 *Chinese manufacturers expanding into Southeast Asia* (*Indonesia*, etc.)
🏭 *New capacity: 30 billion pieces per annum* (equal to China’s glove exports to the US)
⏳ Expected to be operational by mid-2026 → *Could further pressure ASP in 2H2025, affecting profitability*.

📌 *Conclusion*:
*HARTA's profitability faces significant challenges in 2H2025*. Investors should monitor ASP trends, order recovery, and cost controls closely.