YoY, DRB-Hicom (DRBHCOM)’s 1HFY23 revenue rose 22% YoY driven by automotive sales by Proton at 77,321 units, Mitsubishi at 11,811 units, and Isuzu at 8,504 units.
“There is also the improving aviation segment with the re-opening of international borders which drove sales for the aerospace & defence segment as well as services segment and higher financing income from Bank Muamalat,” said Kenanga Research (Kenanga) in the recent Results Note.
Its net profit soared by a larger 83% driven by improved overall distribution margins underpinned by high-margin new models, for example, X50 and Honda City, a steep jump in share of associates’ profits driven by 34%-owned Honda Malaysia on a favourable production mix
skewed toward high-margin HR-V despite softened sales volume, and a strong showing from Bank Muamalat.
QoQ, its 2QFY23 revenue decreased by 3% mainly from weak aerospace & defence segment due to the delay in defence
contract renewal, and slowdown in automotive sector due to shorter working months on the back of consecutive public holidays in
April and June 2023.
Its core net profit plunged by a larger 59% as its share of associates’ profits fell 53% due to Honda Malaysia closing for a week each during both Eid-ul public holidays for scheduled maintenance.
“We like DRBHCOM for being the second largest player in the local automotive sector, second only to Perodua, with a market share of
about 30%, its strong Proton and Honda franchises, and its improving banking franchise under Bank Muamalat,” said the research house.
However, its outlook has weakened with rival Perodua turning up the heat with aggressive new launches.
Kenanga maintains the Market Perform rating with a Target Price of RM1.45. Risks to their call include consumers cutting back on discretionary spending (particularly big-ticket items like new cars) amidst high inflation, persistent disruptions such as chip shortages in the
global automotive supply chain, a slowdown in capital market activities (Bank Muamalat), and a global recession hurting the demand for transport and aviation services.
