KUALA LUMPUR (Aug 27): Shares of Hong Leong Industries Bhd (KL:HLIND) surged on Tuesday to a new all-time high, thanks to record profits at the motorcycle assembler on the back of better margins and other one-off gains.
Hong Leong Industries climbed as much as 7.1% or 80 sen to RM12.04. The stock was trading at RM12 at noon, giving the company a market capitalisation of RM3.9 billion. Trading volume totalled 209,000 shares, more than five times above the 200-day moving average.
Kenanga Investment Bank, the sole research house covering Hong Leong Industries, said the results for the financial year ended June 30, 2024 (FY2024) were better than expected, and it is now raising its forecast for FY2025 by 7% to account for higher sales volume.
Hong Leong Industries is set to make a net profit of RM368.1 million for FY2025, and “we are slightly more positive” for FY2026 at RM370.8 million, Kenanga said. The results for FY2024 exceeded the house's forecast by 7% even after excluding the extraordinary items totalling RM44 million.
Shares of Hong Leong Industries have surged 41% and sharply outperformed other automotive stocks as the company, which mainly assembles and distributes Yamaha branded motorcycles, racked up record profits.
Kenanga — which has the stock on an ‘outperform’ call and target price (TP) of RM13.50 — also noted that Hong Leong Industries has introduced the Yamaha PG-1 this month, which is expected to be a new volume-driven model with production of at least 500 units per month.
Kenanga's TP is based on 12 times FY2025 earnings, higher than the passenger vehicle sector’s average forward earnings multiple of 11 times. Hong Leong Industries deserves the premium, Kenanga said, citing its strong position in the local motorcycle market buoyed by the booming gig economy.
The house said it also likes Hong Leong Industries for its association with the Yamaha motorcycle brand in Malaysia, and for its strong war chest with a net cash of RM1.7 billion, which could be deployed for earnings-accretive acquisitions.
On Monday, Hong Leong Industries reported that net profit for the fourth financial quarter ended June 30, 2024 (4QFY2024) rose 41.9% year-on-year to RM98.33 million. For the full year, net profit rose 33.5% to RM387.89 million thanks to better margins.
During the year, the company also booked a RM25 million insurance compensation for flood damages back in FY2022, as well as an RM18.7 million disposal gain in the fibre cement board business.