Hong Leong Industries Berhad is expected to maintain its earnings growth trajectory over the coming years, supported by improving motorcycle sales, a stronger product mix and expansion initiatives across its motorcycle and tiles businesses, according to CGS Research.
Following a client meeting with HLI management on 11 June 2026, CGS said it maintained a positive view on the group’s earnings outlook, with management targeting continued earnings growth over the next few years.
The research house highlighted that HLI is actively strengthening its motorcycle business by introducing additional premium big bike models to expand its market share in Malaysia’s big bike segment.
The shift towards higher-value models is expected to improve the group’s sales mix and support margin expansion between financial year 2026 and 2028.
Premium Motorcycle Segment to Support Growth
CGS noted that HLI’s motorcycle division remains a key earnings contributor, with its local research and development capabilities helping Yamaha achieve more than 50% market share in Malaysia, compared with an estimated global share of around 8%.
The research house said this demonstrates HLI’s strong execution capabilities and competitive positioning, which could support further market share gains.
Management also expects motorcycle sales to grow in FY2027, supported by election-related liquidity conditions and changes to petrol subsidy quotas.
Based on CGS’ analysis of Jabatan Pengangkutan Jalan Malaysia (JPJ) data, motorcycle sales have historically recorded year-on-year growth during election years.
New Tiles Factory to Boost Margins
Beyond motorcycles, HLI’s tiles segment is also expected to contribute to future earnings growth.
The group’s new automated large-format tiles manufacturing facility is on track for commissioning in FY2027.
According to management, the facility will produce larger-format tiles with average selling prices approximately 20% higher than existing products.
CGS expects the higher-value product offering to improve margins and strengthen earnings growth prospects for the tiles business.
M&A Opportunities Under Review
Meanwhile, HLI continues to explore merger and acquisition (M&A) opportunities across both adjacent and non-adjacent industries.
Management is seeking scalable businesses with strong capital value and sizeable profit contributions, although the timing of potential acquisitions remains uncertain.
CGS noted that HLI’s strong balance sheet provides flexibility for future expansion, with the group holding a net cash position equivalent to around 30% of its market capitalisation.
This financial strength also creates potential for higher shareholder returns, with CGS expecting dividends could exceed RM1.00 per share in FY2027.
CGS Maintains “Add” Call, Raises Confidence in Valuation Upside
CGS reiterated its “Add” recommendation on HLI with a target price of RM26.30, based on a Gordon Growth Model (GGM) valuation.
The valuation assumes a return on equity of 22.8% in calendar year 2028, cost of equity of 9.4% and long-term growth rate of 3%.
CGS said HLI trades at an attractive valuation, with CY2026 ex-cash price-to-earnings ratio (P/E) of 6.9 times, supported by strong return on equity, attractive dividend yields of 6% to 7% for FY2026-FY2028, and a net cash position of RM1.9 billion as at March 2026.
The research house also sees potential for valuation re-rating under Bursa Malaysia’s Value Up Programme.
Key catalysts include stronger premium motorcycle sales, continued Yamaha market share gains and improved product mix.
However, risks include intensifying competition from Chinese motorcycle manufacturers and weaker-than-expected motorcycle demand.
