HIL Industries Bhd’s (HIL) results for the financial year ended 31 December 2024 (FY23) beats Kenanga Research’s expectation, as its core net profit rose 77% year-on-year (YoY), driven by strong auto parts sales to Perodua and higher property profits.
“Its FY23 net profit beat our expectation by 15%. The variance against our forecast was from stronger-than-expected property profits. There is insufficient research coverage by the market to form consensus estimate,” it said.
Hence, the research house raised its FY24 net profit forecast by 2% to reflect better property profit and introduced new FY25F net profit forecasts of RM47.3 million, an increase of 5%.
“Correspondingly, we raise our sum of parts (SoP)-derived target price (TP) by 3% to 94 sen from 91 sen and maintained its MARKET PERFORM call.
“There is no adjustment to our TP based on environmental, social, and corporate governance (ESG) given a 3-star rating as appraised by us,” it said.
Year-on-year, it said that HIL’s core net profit rose by a steeper 77% thanks to better margins from both auto parts supplied to new car models including Perodua Axia, and Alza, and the sales of terrace houses in Sg Buloh.
“FY23 revenue grew 16% underpinned by a 39% top-line growth at its manufacturing segment on strong sales of auto parts to its major customer, Perodua and a 43% top line growth at its property segment on the back of strong take-up for its Amverton townhouses and terrace houses in Sg Buloh.
Quarter-on-quarter (QoQ), it said Rexit’s 4QFY23 revenue rose 5% driven by a stronger manufacturing top-line on full utilisation of production capacity to cope with strong orders from its major customer, Perodua as well as improved property revenue.
“However, its core net profit was flattish due to the initial high production cost for auto parts supplied to the all-new Perodua D66b, partially offset by higher property profits,” it added.
The research house like HIL for its robust demand for its manufacturing division underpinned by strong orders for auto parts especially for new car models such as Perodua Axia and Alza, and upcoming models Perodua D66b and its healthy pipeline of property projects.
“However, we are mindful of HIL inherently having little bargaining power against its customers. This puts it in a precarious situation on a rising cost environment,” it added.
The risks to Kenanga’s call include weaker-than-expected demand and prices for auto parts, higher input costs, and sustainability of recovery in the property sector.
