KUALA LUMPUR: Research firms have trimmed their target price and earnings forecast for DRB-Hicom Bhd after the company' s results for the third quarter ended Sep 30, 2024 results came in at just 21 per cent of consensus estimates.
DRB-Hicom posted a net loss of RM5.3 million in the third quarter of 2024 (Q3 2024).
The losses were attributed to weaker vehicle sales and higher derivative loss of RM80 million.
Public Investment Bank Bhd said DRB-Hicom's results were below the firm's and consensus estimates, at 29.5 per cent and 21.6 per cent of full-year forecasts respectively.
The firm trimmed its earnings forecast for the company by an average of 20 per cent for financial year 2024 (FY24)-FY26, factoring in higher operating expenses and weaker performance across all its business divisions.
It also added that the automotive sector is expected to see softer demand next year.
"While the Malaysia Automotive Association has recently revised Malaysia's total industry volume (TIV) forecast to 800,000 units for 2024, a softer demand is anticipated in 2025 due to the expected rationalisation of fuel subsidy, weaker consumer sentiment, and a lack of catalysts for the auto sector. "Additionally, the influx of new model launches and competitive pricing may intensify market competition, further squeezing sector margins and limiting earnings growth," it said in a note.
PublicInvest Research maintained its 'Neutral' call on the stock with a lower target price of RM1.10 from RM1.38 previously.
Separately, Hong Leong Investment Bank Bhd (HLIB Research) cut its earnings forecast for the group by 57.5 per cent, 30.4 per cent and 33.4 per cent for FY24, FY25 and FY26 respectively after taking into consideration the stiffer automotive market environment.
It said that DRB will continue to strengthen its automotive position in Malaysia, leveraging onto core original equipment manufacturers (OEMs) namely Proton, Honda, Isuzu and Mitsubishi.
"However, the Malaysia automotive segment has been facing stiff competition from new entrance of Chinese OEMs with their attractive new models at competitive pricing."
"Proton is targeting to launch its own "e.MAS 7" EV model in the coming month and another EV variant in 2025/26, by leveraging Geely's technology.
Honda is expected to launch the Civic facelift in Q4 2024/Q1 2025," it said.
The firm downgraded its call for the stock to 'Hold' with a lower target price of RM1.00 from RM1.55 previously.