KUALA LUMPUR: Hong Leong Investment Bank (HLIB) remained positive on DRB-HICOM Bhd’s long-term outlook on potential growth driven by Proton subsidiaries amid increasing market competition.
In a research note, HLIB said that Proton is targeting to achieve 2024 sales of 160,000 units against 151,000 units in 2023, through new models introduced and attractive promotional campaigns.
“Proton has recently launched the updated X50 RC with good discounts and is expected to launch another X70 facelift soon, along with introducing a new electric vehicle (EV) model by the end of the year in line with management’s target of one new model launch per annum,” it said.
HLIB said the DRB-Hicom management brushed aside the potential market competition from Zeekr’s entry into the Malaysian market, given the different market segment, where Zeekr would be positioned as a higher premium segment than Proton’s e.MAS EV.
Zeeker is a publicly listed Chinese automobile company and the brand is owned by Geely Automobile Holdings.
HLIB also said that Bank Muamalat and CTRM would continue supporting DRB-Hicom 2024’s performance.
“We reiterate our ‘buy’ rating with an unchanged target price (TP) of RM1.65 based on a 20% discount to sum-of-parts (SOP) RM2.04,” said the research firm.
Additionally, Kenanga Research also maintained its ‘market perform’ call on DRB-Hicom with a SOP-derived TP of RM1.40.
The research house said it likes the company for being the second largest player in the local automotive sector, second only to Perodua, with a market share of about 30% and its strong Proton and Honda franchises as well as its improving banking franchise under Bank Muamalat.
“However, DRB-Hicom’s outlook has weakened with Rival Perodua turning up the heat with aggressive new launches, coupled with earnings drags from certain non-performing units,” it said.
Kenanga Research said the risks to its call include consumers cutting back on discretionary spending amidst high inflation and persistent disruptions in the global supply chain.
“Other risks also include a slowdown in capital market activities and a global recession hurting the demand for transport and aviation services,” it added.
— BERNAMA
