KUALA LUMPUR (Jan 6): D&O Green Technologies Bhd (KL:D&O) said its 93.2%-owned subsidiary Dominant Electronics Sdn Bhd (DESB) has signed a memorandum of understanding (MOU) with Jing Wei Hirain Automotive Electronics Malaysia Sdn Bhd to establish a new operating company in Malaysia focusing on engineering services and automotive module production.

Jing Wei Hirain is the Malaysian subsidiary of Beijing Jingwei Hirain Technologies Co Inc, which is listed on the STAR Market of the Shanghai Stock Exchange. The company specialises in developing and manufacturing automotive electronics products.

According to a bourse filing, D&O said the new company will function as a subsidiary of DESB. Its primary focus will include engineering services and the design, production, and sale of automotive modules for potential global markets.

Under the partnership, DESB will oversee production, local research and development, and sales operations, while Hirain will contribute technical expertise and utilise its sales channels to drive business growth.

The parties plan to finalise the collaboration and incorporate the new company within 90 days of the MOU signing.

D&O also said that the MOU is in the company’s best interest, though it will not have an immediate material effect on the company’s financial or operational status.

Shares of D&O closed one sen or 0.5% higher at RM2.03 on Monday, giving it a market capitalisation of RM2.52 billion.

The stock performed poorly in 2024, where it lost 43.2%. It fell below the RM2 mark on Sept 11, after the company reported weaker-than-expected results for the first half ended June 30, 2024 (1HFY2024) on Aug 26.

The stock then recovered slightly, but fell to its lowest point of the year at RM1.83 on Nov 29, as analysts began to cut their earnings estimates and target prices (TPs) for the stock, following the company's slower-than-expected recovery.

On Nov 25, MIDF Research downgraded its recommendation for D&O to 'neutral' from 'buy', with a revised TP of RM2.07 versus RM3.85.

Similarly, Kenanga Research lowered its net profit estimates by 14% to RM63 million for FY2024 and by 6% to RM114 million for FY2025, reflecting reduced plant utilisation assumptions and adjusted margin expectations.

Nevertheless, the broker maintained its 'outperform' call on D&O for its unique exposure to the automotive LED business, penetration into the electric vehicle market, and venture into next-generation smart LEDs, which yield higher margins.