Maybank IB has rates Sime Darby Berhad as Best-in-class in its ESG score based on its latest ESG assessment. The company scored well across ‘E’, ‘S’ and ‘G’ showcasing improving trend, lower intensity and improving employee diversity and well-being. Its overall ESG score – under our proprietary ESG scoring methodology – is 69 (out of 100), which Maybank IB said it considers to be above-average.
The house maintains its earnings forecasts and TP of MYR2.79 (discounted SOP) for SIME. D/G to HOLD following the recent run-up in share price.
Improving performance across ESG parameters
Within the automotive sector coverage, Maybank said SIME leads in its proprietary ESG scoring methodology, boasting strong and improving performance across ESG parameters. Supported by a well-established Sustainability Blueprint since 2021, notable enhancements include increased EV sales as a % of group auto sales (FY23: 18%; FY21: negligible), higher representation of women in top management (FY23: 12%; FY21: 7%), reduced lost time injury rate (FY23: 1.03; FY21: 1.69), and more.
CEO Dato Jeffri Salim has said the group will be looking to expand its electric portfolio after securing distribution rights to BYD and Chery, the plans are also afoot for CKD assembly. Additionally, the group is actively aligning with TCFD standards to mitigate climate change impact and the
associated risks.
Lack in carbon emission reduction commitments
On the flip side, key areas for improvement are its commitments to achieving net zero/carbon emission reduction and enhancing Board diversity. SIME currently does not capture its Scope 3 emissions but aims to start reporting by FY24E, which will include business travel and employee commute. It also plans to expand coverage further in the medium term.
Valuation upside has been priced-in
Maybank IB said it is optimistic on SIME’s merger with UMW, expecting the merger to enhance the group’s valuation and earnings. Having said that, the house believes the valuation upside has been largely priced in, following the recent runup in SIME’s share price. The group has indicated it will maintain its DPR of >50%; the house expects >3% DY from FY25E.
