We peg a +1sd target PE of 35.7x (5-year time frame, pre-COVID) to Hartalega's mid-CY26E EPS to derive our TP of RM2.50. Light investor positioning and the prospect of sequential/multi-year earnings recovery should support the premium valuation in our view.

Key downside risks that could push the Hartalega stock below our target price include: [1] A Slower-than-expected volume recovery, which in turn caps ASP normalization, [2] A significant/irrational capacity addition by peers, and [3] Fluctuation in ASP/FX which could hamper/disrupt margins recovery.