KUALA LUMPUR: Seng Fong Holdings Bhd (SFH) is well-positioned to capitalise on promising automotive opportunities in India and China, supported by its strong market presence in both regions.
According to Hong Leong Investment Bank Bhd (HLIB), more than 80 per cent of SFH's sales come from the automotive markets in China and India, placing the company in a strong position to benefit from the positive outlook in these sectors.
"As Malaysia's leading rubber block manufacturer with exposure to the Chinese and Indian automotive markets, SFH is well-positioned to capitalise on the promising automotive prospects in these regions.
"Both countries are expected to see growth in total registered and new vehicle sales in the coming years, which will positively impact tyre demand," it said in a note.
Meanwhile, HLIB said the increasing share of electric vehicles (EVs) in India and China markets is likely to accelerate tire wear.
Unlike ICE vehicles, the bank said EVs are characterised by their heavier weight and powerful torque, which leads to accelerated tire wear and tear.
"With significant growth potential still present in the global EV market, especially the markets where SFH has presence, the increasing share of EVs is set to structurally shorten the average tire wear period, ultimately driving higher demand for rubber blocks.
"With this, we project SFH's core net profit to grow at a respectable compound annual growth rate (CAGR) of 12.3 per cent from the financial year 2025 (FY25) to FY27.
"Non rated. We value SFH at RM1.51," it added.