KUALA LUMPUR: Hong Leong Investment Bhd (HLIB) expects limited growth ahead for Panasonic Manufacturing Malaysia Bhd (PMM) due to lower plant utilisation following the discontinuation of kitchen appliances.
The research house said, from management guidance, that the new water-related products will take 3-5 years to ramp up.
"We view that this venture might not be able to fully offset the decline from the loss of sales of recently terminated kitchen appliance businesses as the group does not have a first mover advantage," it said in a note today.
Due to the realignment of global production for the Panasonic Group, some kitchen appliances and rice cooker products were terminated in the second half of FY22.
This was evident with the reduction of RM75.9 million in revenue in FY24 from this kitchen appliances business, which contributed on average 13 per cent and 9.0 per cent of the group's revenue and PBT for the past 5 years, respectively.
"We expect the plant to be underutilised for the next couple of years before PMM ramps up its production of these new products," said the research house.
HLIB said the price point for these products is set slightly higher than its competitors, which may further hinder efforts to gain market share.
"On a brighter note, we reckon that PMM could potentially benefit from higher discretionary spending from the Employees Provident Fund (EPF) Account 3 and a civil servant pay hike.
"Apart from that, moderation of raw material prices would also help in cushioning the bottom line impact from lower sales.
"As such, we maintain a hold, with a target price of RM20.02 based on 13x PE multiplied by FY25 earnings," said the research house.
On the export front, HLIB believes the outlook is slower for PMM with the moderation in global growth amid elevated inflation, the escalation of geopolitical tensions, and a slower-than-expected economic recovery from China.