Guocera, the ceramic tile manufacturing arm of Hong Leong Industries Bhd (RM420 million investment in an Industry 4.0 manufacturing facility in Kluang, Johor is positioned for growth. Would the big bet pay off?
According to Kenanga Research, the expansion, which introduces advanced slab production technology through a partnership with Italy-based Siti B&T Gruppo, could enable Guocera to capture rising demand for large-format porcelain tiles while significantly improving its profitability over the next three years.
The research house noted that the global porcelain tiles market is expected to exceed US$18 billion by 2035, representing a compound annual growth rate (CAGR) of about 6%, compared with approximately 2% growth for the broader ceramic tiles market.
Porcelain tiles are increasingly favoured in commercial and residential applications due to their higher density, ultra-low water absorption of 0.5% or less and superior mechanical strength.
These characteristics make the material particularly suitable for high-traffic applications such as hotels and healthcare facilities, as well as modern residential developments seeking seamless surfaces with minimal grout lines.
Investment Doubles Capacity
Kenanga said Guocera’s automated facility has a payback period of between five and six years and is expected to add between six million and seven million square metres of annual production capacity.
This will effectively double Guocera’s tile manufacturing capacity to approximately 13.5 million sq m a year.
More importantly, the expanded facility makes Guocera the first domestic manufacturer in Malaysia capable of producing large-format tiles measuring up to 120cm by 240cm.
The larger slabs command significantly higher selling prices compared with Guocera’s existing 60cm by 60cm ceramic tiles.
Kenanga noted that large-format slabs can carry recommended retail prices of up to RM1,300 per slab, compared with up to RM40 per piece for conventional 60cm by 60cm ceramic tiles.
While large-format products currently account for less than 5% of Guocera’s sales, the company aims to increase their contribution to 25% within the next three years.
The shift would allow Guocera to target a higher-margin segment that has historically been dominated by European imports.
Export Contribution To Rise
Guocera is also looking to strengthen its international presence as production capacity expands.
Kenanga expects the division’s export contribution to increase from the current 20% of sales to around 30% within the next three years, with Thailand, Vietnam, the United States, Singapore and Indonesia among the targeted markets.
Guocera currently exports its products to more than 30 countries across the Asia-Pacific region, Middle East, Europe and North America.
The research house said the combination of higher-value products, increased manufacturing capacity and a larger export contribution should support a significant improvement in Guocera’s profitability.
Margin Expansion In Sight
For FY2024 to FY2026, Guocera recorded revenue of between RM250 million and RM320 million, with segmental profit after tax ranging between RM5 million and RM10 million.
The division accounted for about 9% of HLIND’s group revenue but only around 2% of group net profit, reflecting a net profit margin of approximately 3%.
Kenanga expects Guocera’s net margin to expand to above 10% over the next three years as the division ramps up large-format porcelain slab production and increases its export market share.
The improvement is expected to be gradual and will include the recognition of start-up costs associated with the new facility.
Despite the anticipated improvement, Guocera’s overall contribution to group revenue is expected to remain below 10%, as HLIND continues to focus on its core Yamaha motorcycle manufacturing operations.
As a result, the research house continues to regard Guocera as a non-core business operation within HLIND.
Support For Core Business
Meanwhile, HLIND’s core motorcycle business continues to provide the bulk of the group’s earnings.
For FY2026, the group introduced seven new Yamaha models, which have supported volume and margin growth.
Among the new models were the Yamaha NVX, launched in September 2025 with a recommended retail price of RM11,998; Yamaha YZF-R25, launched in October 2025 at RM23,098; and Yamaha Ego Gear Pro, launched in November 2025 at RM6,198.
The company also introduced the Yamaha MT-09 and MT-09 SP as part of its product refresh.
Kenanga’s outlook for HLIND therefore incorporates both the continued strength of its core motorcycle operations and the longer-term potential from Guocera’s transformation into a higher-value tile manufacturer.
The research house believes Guocera’s move into large-format porcelain slabs could provide HLIND with an additional earnings growth avenue, particularly as demand for premium architectural surfaces and export opportunities expands.
