DRB-Hicom Bhd’s 9MFY23 results met expectations, with its core net profit rose 5% YoY driven by strong Proton vehicles sales and better distribution margins from new models.
“This, coupled with an improved performance from Bank Muamalat (contribute to the performance) and more than offset weaker earnings from Honda Malaysia,” said Kenanga Research in its Results Note today (Nov 24).
Thus, Kenanga maintains a MARKET PERFORM call, forecasts and sum-of-parts (SoP)-derived TP of RM1.45, with no adjustment to our TP based on 3-star ESG rating.
“We like DRB-Hicom for being the second largest player in the local automotive sector with a market share of about 30%, its strong Proton and Honda franchises, and its improving banking franchise under Bank Muamalat.
“However, its outlook has weakened with rival Perodua turning up the heat with aggressive new launches,” it said.
The risks to Kenanga’s call include consumers cutting back on discretionary spending amidst inflation, persistent disruptions (including 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.
The research house noted DRB-Hicom’s 9MFY23 results met expectations at 75% of both its full-year forecast and consensus estimates.
“YoY, its 9MFY23 revenue rose 8% YoY driven by automotive sales, up by 9%, led by Proton at 114,806 units, up by 17%, Mitsubishi at 16,521 units, down by 12%, Isuzu at 12,572 units, up by 6%, services segment, up by 12%) and higher financing income from Bank Muamalat, up by 37%.”
These more than offset the weakening sales from aerospace and defence, down by 13% due to lower delivery of defence products despite improving aviation sector, and postal, down by 15% due to deteriorating operating environment.
“However, its net profit only rose 5% on reduced share of associates’ profit, down by 11% from 34%-owned Honda Malaysia due to a weaker sales volume, down by 10% to 54,017 units.”
