BERHAD: Strategic Shifts Underpin Positive Outlook, Target Price Upgraded
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Despite navigating a period of significant industry headwinds, the company is demonstrating strategic agility, positioning itself for a robust recovery. While recent quarterly performance reflected prevailing market pressures, analysts at TA Securities foresee an attractive upside, leading to a “BUY” recommendation with a revised target price.
Performance Review
The automotive sector has faced a challenging environment, marked by subdued consumer confidence and intense competition. This has translated into a decline in reported revenue of 41.9% year-on-year to RM491.3 million for the first quarter of FY26, alongside an 88.2% year-on-year reduction in net profit to RM8.3 million. These figures, while reflecting the current market realities, are increasingly viewed through the lens of a company actively addressing these challenges and capitalizing on future growth avenues.
Strategic Initiatives and Efficiency Gains
Management has proactively implemented various cost efficiency measures across its operations, aiming to streamline processes and optimize resource allocation to enhance future profitability. These initiatives are expected to gradually yield positive results, strengthening the company’s financial resilience in a fluctuating market. Furthermore, strategic partnerships, such as those with Xpeng and Deepal for electric vehicles, are pivotal in diversifying its product portfolio and tapping into emerging market segments, offering new growth engines.
Navigating Market Challenges
The softer utilization rates observed due to weaker sales volumes in traditional segments are being actively mitigated by the introduction of new models and expansion into the rapidly growing EV market. While the expiry of current EV incentives by end-2025 presents a challenge, the company’s long-term strategy focuses on capturing market share through innovative offerings and competitive pricing in the evolving automotive landscape. The diversification through EV partnerships is crucial in offsetting potential shortfalls from established brands.
Outlook and Investment Recommendation
Looking ahead, the Malaysian auto sector is anticipated to normalize, with a gradual recovery in demand. The company’s enhanced strategic positioning, coupled with an anticipated improvement in market dynamics and the positive momentum from new model launches and EV partnerships, is expected to drive future earnings. Based on these factors, TA Securities has upgraded its outlook on the stock, issuing a BUY recommendation with a target price of RM0.25, indicating a 25.0% upside from its last traded price of RM0.20.
