Weak disclosures led to below-average ESG rating for Tan Chong Motor’s, Maybank IB says this due to lack of disclosures on its key Environmental parameters. This has led to a slightly below-average ESG score of 48 under our proprietary ESG scoring methodology. Positively, TCM excels in some “E” and “S” initiatives, i.e. its LSSPV project in Serendah, robust CSR activities and its intent to become carbon neutral for its assembly and manufacturing division by 2025. The house maintains its earnings forecasts and target price of MYR0.85, based on unchanged 0.2x FY24E BV. U/G to HOLD following the recent weakness in share price.
Key shortfalls
TCM’s slightly below-average score of 48 (out of 100) is mainly attributed to insufficient disclosure of certain Environmental parameters, such as carbon emissions data and EV sales. Other factors dragging down its ESG score are a rising trend in emission intensity and scheduled waste intensity and an increasing CEO salary despite poor financial performance.
Demonstrated good “E” and “S” initiatives
Positively, TCM stands out in several “E” and “S” initiatives. A standout is the launch of its first floating LSSPV plant in Serendah, operational since 5 Jan 2024. The plant is set to supply 1,043,114 MWh of green energy to TNB, and reduce CO2 emissions by 610,221 tonnes. Additionally, TCM has outlined a Carbon Neutrality Road Map for its assembly and manufacturing division, aiming for carbon neutrality by 2025. Moreover, it engages in robust CSR activities, including scholarships and job opportunities for B40 families, and prioritizes product quality and safety, aligning with its
principal partner Nissan’s commitment to zero fatalities.
Outlook remains challenging
ESG aside, the house anticipates a challenging outlook for TCM, given the persistently lackluster demand for its products, evident in its poor vehicle sales performance. Uncertainties surrounding its overseas operating landscape further compound the challenges ahead. Having said that, Maybank IB said it believes these have been largely reflected in its current valuation.
