Better quarters ahead for DRB-Hicom

The automotive segment within the group will be the key contributor and drive earnings growth


THE automotive segment remains a key contributor and is expected to drive earnings growth at DRB-Hicom Bhd.

Public Investment Bank Bhd (PublicInvest) stated that with the resumption of economic activities, Proton Holdings Bhd and other marques within the group will continue to ramp up production and accelerate delivery to meet surging demand.

Underpinned by extension of sales tax exemption for passenger vehicles until June 30, 2020, Proton delivered 10,380 units in September compared to 2,741 units in August, and 1,904 units in July during the lockdown.

“The lifting of interstate travel ban and gradual reopening of borders is expected to boost the group’s other business segments such as logistics, defence, banking and concession,” the investment bank noted in a research note on DRB-Hicom last Friday.

DRB-Hicom stated that the lockdowns instituted by the government to contain the Covid-19 impacted its operations in the third quarter (3Q), resulting in the group posting a net loss of RM179.44 million for the 3Q ended Sept 30, 2021 (3Q21). The group had made a net profit of RM47.49 million in 3Q20.

Revenue for the 3Q fell 40.5% to RM2.12 billion from RM3.56 billion in 3Q20.

As economic activities pick up following the high vaccination rate in the country, PublicInvest expects DRB-Hicom’s earnings growth trajectory to recover in FY22-FY23F.

“Therefore, we raise FY22F-FY23F profit forecast to RM220 million and RM272 million, respectively, though our FY21F net loss forecast has now widened to RM193 million.

“We remain positive on its growth prospects and retain our ‘Outperform’ call on DRB-Hicom with a revised target price of RM2.18 (previously RM2),” it said. DRB-Hicom had said the government’s decision to extend the sales tax exemption for passenger vehicles until June 30, 2022, will induce strong demand for cars.

With operations now running at full capacity governed by strict standard operating procedures, Proton and other marques within the group are ramping up production and accelerating delivery, alongside various promotion programmes to spur sales growth.

DRB-Hicom added that the Proton X50 and X70 models continue to garner strong demand and have become leaders in their respective segments with overall 27,312 units sold year-to-date (YTD), which accounts for 37.4% of Proton’s overall YTD sales.

The group added that the Saga too has continued its leadership of the A-segment sedan market and remains the best-selling Proton model.