KUALA LUMPUR (Nov 26): DRB-HICOM Bhd (KL:DRBHCOM) fell sharply on Wednesday as investors baulked at the latest quarterly loss while analysts turned bearish amid a subdued outlook.
Public Investment Bank and Hong Leong Investment Bank downgraded their recommendations to ‘sell’ following the recent rally in DRB-HICOM's share price, leaving the stock with only one ‘buy’ call out of four research houses covering it.
“We remain cautious on Malaysia’s automotive market environment, given continuous stiff market competition,” said Hong Leong Investment Bank, noting that the postal and defence units are also continuing to drag on DRB-HICOM.
Shares of DRB-HICOM fell as much as 16 sen or 12% to RM1.14 on Wednesday, their lowest since Oct 13. The counter was trading at RM1.16 as more than four million shares changed hands as at 10am. At the last price, the company had a market capitalisation of RM2.2 billion.
There are now three ‘sell’ calls on DRB-HICOM, including from Kenanga Investment Bank which maintained its ‘underperform’ rating on Wednesday. Citi Research is the sole house with a ‘buy’ call post-earnings.
The average target price is now 97 sen, according to Bloomberg, indicating potential downside of up to 16% in the next 12 months from current prices.
DRB-HICOM is still up by nearly 9% so far this year as investors placed their hopes on electric vehicles launched by its key automotive unit Proton Holdings Bhd. The company, which also assembles vehicles for brands like Honda and Audi, faces weakened consumer sentiment.
“The influx of competitively priced Chinese brands will intensify competition, squeezing profitability and limiting earnings growth,” said Public Investment Bank. “The current valuation appears stretched,” the house noted.