Proton’s turnaround plan looks bright

The auto manufacturer is on track to generate a profit within the next 3 years given its current strong performance


PROTON Holdings Bhd’s turn-around programme is progressing fairly as analysts expect the local carmaker to return to profitability in two to three years, if it can maintain annual sales at above 100,000 units.

Kenanga Investment Bank Bhd (Kenanga IB Research) analyst Wan Mustaqim Wan Ab Aziz said the auto manufacturer is on track to generate a profit within the next three years given its current strong performance.

The national car marque managed to raise its market share to 21.1% in 2020, up 4.4% from the previous year, despite supply disruptions caused by the Movement Control Order (MCO).

Proton kept its sales performance above 100,000 units last year, with 109,716 vehicles sold for 2020, boosted by the government’s stimulus package which included an extended Sales and Service Tax (SST) exemption for passenger vehicles.

The local carmaker first surpassed the 100,000 threshold in 2019 after it sold 100,821 units of vehicles for the domestic and export markets.

Wan Mustaqim attributed the success mainly to Proton’s partnership with China’s Zhejiang Geely Holding Group Co Ltd which began in the middle of 2017.

“Prior to its partnership with Geely, Proton sold below 100,000 units. With the current record, its profitability target looks to be progressing well, especially with solid deliveries of its X50 model. The Proton manufacturing plant is also still under capacity,” he told The Malaysian Reserve recently.

Proton CEO Dr Li Chunrong had previously expected the company to return to profitability by 2020 prior to the Covid-19 outbreak.

Proton, in a statement last Friday, announced it hit a new monthly sales high of 14,989 units in March 2021, partly driven by the record sales of its X70 and X50 SUVs. Its total cumulative sales for the year stand at 32,826 units.

The monthly figure, which represents sales for both its export and import markets, showed 26.2% month-on-month increase from February.

Proton said it now has an estimated market share of 23.5% in the first quarter of the year (1Q21), marking its highest quarterly market share figure since March 2012.

The Saga model was still its best-selling product in March 2021 with 5,589 units sold, followed by the X50 and X70 with 3,513 and 2,337 units sold respectively.

The X50 was launched in October last year, following the successful unveiling of the X70 in December 2018. The B-segment SUV received more than 30,000 bookings within the first three months since it came into market in late 2020.

Proton has also restructured its distribution activities, where all of its branches have been sold to new investors, while Proton Edar Sdn Bhd will only maintain four out- lets as part of efforts to strengthen its dealership models.

Kenanga IB Research recently maintained its ‘Overweight’ call on the automotive sector, estimating total industry volume to reach 585,000 units in 2021, an 11% increase compared to 2020.

The research firm said new launches such as the Perodua Ativa, Proton X50, Honda City and Nissan Almera could help spur sales, in addition to back-logged bookings. This was further boosted by the extension of SST exemption to June 30, 2021.

Wan Mustaqim said in the 4Q20, Proton’s major shareholder DRB- Hicom Bhd performed within expectations, while MBM Resources Bhd and UMW Holdings Bhd’s performances came above expectation.

Overall, he said all automotive players recorded significant increase in profit buoyed by the sales tax exemption and tremendous production level contribution from associates.

Kenanga IB Research forecasts most auto players to chart a slower drive in 1Q21, attributed to sluggish showroom activity from MCO 2.0 and shortage of components and parts for select players, especially during the temporary closure of automotive factories in the first week of MCO 2.0.

“Nevertheless, all-new model launches in March 2021, especially the highly anticipated all-new Pero- dua Ativa (13,000 units outstanding bookings), should cushion the negative impacts,” Wan Mustaqim said.