Automotive group MBM Resources Bhd’s counter has been downgraded to a ‘Sell’ from ‘Hold’ at a local research house due to its cautious view on Perusahaan Otomobil Kedua Sdn Bhd’s (Perodua) earnings outlook and competitive automotive landscape amidst the sprouting up of new electric vehicle (EV) entrants.

In a note released today, Affin Hwang Investment Bank (AHIB) said that it has raised Perodua’s total industry volume (TIV) forecast to 260,000 units, up from 220,000 units, on stronger-than expected sales volume and healthy backlog orders of 155,000 units, yet it has slashed FY23E earnings by 7.1% as it lowered its margin assumption amidst higher discounting activities.

It has also revised MBM’s target price to RM3.22, down 1sen from its earlier target. The stock closed up 7 sen at RM3.69 yesterday. Its 52-week high was RM3.97 and 52-week low RM3.13.

In an exchange filing on Aug 23, MBM posted a net profit of RM51.93 million for the second quarter ended June 30, 2023, down 29.9% from the same period last year, as vehicle sales came off the high demand experienced during the sales tax exemption period last year.

Its 2Q23 revenue was down 3.3% to RM539.57 million, with lower revenue coming mainly from its motor trading division.

For the first half, its net profit was down 19.3% to RM131.88 million on RM1.10 billion in revenue. — TMR