KUALA LUMPUR (Nov 24): Analysts maintain a positive outlook on DRB-Hicom Bhd, despite the group recording a 50.8% drop in net profit in the third quarter ending Sept 30, 2023 (3QFY2023), compared to the same period last year.

In a research note on Friday, Kenanga Investment Bank Bhd stated that the group's results for its nine-month period ending Sept 30, 2023 (9MFY2023) met expectations, reaching 75% of both its full-year forecast and the consensus estimates.

"DRB-Hicom's 9MFY2023 core net profit rose 5% year-on-year (y-o-y), driven by strong Proton vehicle sales and improved distribution margins from new models, coupled with an enhanced performance from Bank Muamalat. This more than offset weaker earnings from the group's 34%-owned Honda Malaysia, attributed to a weaker sales volume," it added.

Kenanga emphasised its positive stance on DRB-Hicom, highlighting DRB-Hicom's position as the second-largest player in the local automotive sector, with a market share of about 30%; strong Proton and Honda franchises; and an improving banking franchise under Bank Muamalat.

However, Kenanga acknowledged a weakened outlook, with rival Perodua intensifying competition through aggressive new launches.

Thus, the research firm maintained its "market perform" call on DRB-Hicom, with a sum-of-parts (SOP)-derived target price (TP) of RM1.45.

Separately, Public Investment Bank Bhd (PIVB) noted that DRB-Hicom's 3QFY2023 results were within its estimates at 70.2% of full-year forecast, though slightly below market expectations at 68.3%.

The research house continues to be optimistic about DRB-Hicom's growth prospects, stating that despite the expiry of the sales and service tax (SST) holiday and rising interest rates, demand for the group's offerings remains healthy, underpinned by new model launches.

"In addition, Proton officially entered the EV (electric vehicle) market with Smart #1 in November 2023 and targets to introduce its first EV by 2025. The group is also committed to strengthening its operational efficiency for its other core business segments," PIVB said.

Thus, PIVB retained its "outperform" call on DRB-Hicom, with an unchanged SOP-based TP of RM2.10.

At the time of writing on Friday, shares in DRB-Hicom rose one sen or 0.7% to RM1.44, giving the group a market capitalisation of RM2.78 billion.

Read also:
DRB-Hicom's 3Q net profit halves to RM71 mil