DRB Hicoms 1QFY24 results met expectations. Its 1QFY24 core net profit plunged 22% YoY as improved operating results were negated by a higher tax. Kenanga said it has a cautious outlook as rival Perodua is turning up the heat with aggressive new launches.
Kenanga has maintained its forecasts, TP of RM1.40 and MARKET PERFORM call. DRBHCOM’s 1QFY24 core net profit (excluding one-offs at RM7m) met expectations at 28% and 25% of our full-year forecast and the full-year consensus estimate, respectively.
YoY, its 1QFY24 revenue rose 6% YoY driven by: (i) automotive sales (+1%) on higher-priced new models launches while QoQ, its 1QFY24 revenue rose 15% on a seasonally stronger quarter driven by Proton (+6%), Banking (+12%) and Postal (+11%).
However, its core net profit almost tripled as losses from the postal and service segments narrowed, coupled with improved associates’ profit (+71%) despite lower sales volume from 34%-owned Honda Malaysia (-17%).
The house also maintain our Sum-of-Parts (SoP)-derived TP of RM1.40.
Investment case. We like DRBHCOM for: (i) being the second largest player in the local automotive sector, second only to Perodua, with a market share of about 30%, (ii) its strong Proton and Honda franchises, and (iii) its improving banking franchise under Bank Muamalat.
However, its outlook has weakened with rival Perodua turning up the heat with aggressive new launches, coupled with earnings drags from certain non-performing units. Maintain MARKET PERFORM.
