KUALA LUMPUR (June 14): Analysts remain upbeat on the outlook of DRB-Hicom (KL:DRBHCOM), despite its 51%-owned national automaker Proton Holdings Bhd anticipating flattish vehicle sales amid increasing market competition.
DRB-Hicom is targeting Proton vehicle sales of 160,000 units in 2024, a slight increase from 151,000 units in 2023, said Hong Leong Investment Bank (HLIB) Research in a note, following a DRB-Hicom’s management briefing.
The research house said that although Proton’s sales of 50,200 units in the first four months of 2024 were slightly below target, DRB-Hicom remains optimistic about stronger future sales due to various implemented strategies, including the recent launch of the updated X50 RC and the upcoming launches of a facelifted X70 and a new electric vehicle (EV) model dubbed “e.MAS”.
“Proton is also developing a new Global Modular Architecture (GMA) platform for its upcoming five next-generation models, targeting an annual production of 200,000 units,” HLIB noted, adding that Proton is working with supply chain vendors to invest in new technologies and reduce costs to achieve this.
Despite the entry of the Chinese EV brand Zeekr into the Malaysian market, HLIB said DRB-Hicom brushed aside potential market competition due to Zeekr’s higher premium segment.
Thus, HLIB maintained its “buy” recommendation on DRB-Hicom with an unchanged target price (TP) of RM1.65, based on a 20% discount to the sum-of-parts (SOP) value of RM2.04, remaining positive on DRB-Hicom’s long-term growth potential, driven by Proton subsidiaries.
Meanwhile, Kenanga Research said it likes DRB-Hicom for being the second-largest player in the local automotive sector with a 30% market share, its strong Proton and Honda franchises, and its improving banking franchise under Bank Muamalat.
However, it noted that the group’s outlook is challenged by Perodua’s aggressive new launches and earnings drags from non-performing units.
The research house maintains a “market perform” rating on DRB-Hicom with an unchanged TP of RM1.40, but flagged risks including reduced consumer spending on big-ticket items due to high inflation, persistent disruptions in the global automotive supply chain, and a slowdown in capital market activities affecting Bank Muamalat.
At 10:55 am on Friday, shares in DRB-Hicom traded unchanged at RM1.39, giving the group a market capitalisation of RM2.69 billion.