kstan@hlib.hongleong.com.my
(603) 2083 1714
MCE Holdings
Right place at the right time
Sector coverage: Automotive
Company description: MCE is principally involved in the manufacturing and supply of electronics and mechatronics auto components.
MCE, a Tier-1 supplier of automotive electronics and mechatronics, is poised for a multi-year growth phase driven by its landmark Perodua EV contract, which marks entry into high-value infotainment and ADAS, as well as strategic US wins with Dorman and JVIS that broaden its export footprint. The group is also diversifying into new verticals via non-automotive manufacturing, ADAS mmWave radar production, Chery’s localisation supply chain and the Indian automotive market. We initiate coverage on MCE with a BUY rating and TP of RM2.40 based on mid-FY27 partially diluted EPS of 16 sen, viewing MCE as a resilient, scalable proxy to Malaysia’s transition toward high-value auto electronics and the global “China + N” supply chain realignment.
Company background
MCE is a Tier-1 supplier of OEM automotive electronics and mechatronics with key customers Perodua, Proton and Toyota. Its portfolio spans electronics and mechatronics, with new developments in infotainment, meter clusters and ADAS for both EVs and ICE vehicles. MCE operates plants in JB and Klang and is building a high-tech Serendah plant.
Breakthrough entry into EV supply chain
MCE’s contract win with Perodua mark its first entry into the EV supply chain, securing supply of high-value infotainment and ADAS components, with revenue per vehicle at ~RM3k – 10x its typical value. With Perodua targeting an affordable launch price, we estimate MCE’s annual revenue from this programme could amount to RM39.8–59.7m per annum, or 26-38% of FY24 revenue, making it a powerful earnings catalyst.
Expanding into the US market
MCE is accelerating its global expansion with two strategic US wins for Nasdaq-listed Dorman in the automotive aftermarket and Michigan-based JVIS, a supplier to major OEMs. The Dorman deal taps a large, recurring market. JVIS awarded two multi-year mechatronics contracts worth RM91.7m over 60 months, adding ~RM18.3m annually. Secured via competitive tenders, these wins highlight MCE’s technical credibility and global competitiveness.
Expanding to new growth verticals and market
MCE is actively diversifying its revenue base through multiple strategic partnerships. A Mar 2025 JV with Hong Kong’s Sounding Industries leverages Johor capacity to produce non-automotive products. A May 2025 JV with China’s Nanjing Chuhang marks entry into ADAS via mmWave radar production at Serendah. MoUs with Chery-linked suppliers Cheling and Atech position MCE in Chery’s Malaysian localisation supply chain. In Nov 2024, a JV with India’s Abhishek Electronics targets the fast-growing Indian auto market. These moves diversify MCE’s products, markets, and growth drivers while limiting upfront investment.
Forecast
We project MCE’s FY25–27 core earnings to grow at a CAGR of 15.8% with estimated FY25-27 earnings of RM20.2/21.4/27.0m. FY26 growth will be driven by contribution from Dorman and non-auto segment starting in 1HFY26, with a stronger lift in 2HFY26 from Perodua’s EV supply. FY27 will see the full-year EV impact, maiden JVIS contribution, and scaling of Dorman and non-auto orders. MCE has a robust balance sheet with net cash position of RM83.6m (59.8 sen/share, ~42% of market cap).
Initiate with BUY and TP of RM2.40
based on 15x PE on mid-FY27 partially diluted EPS of 16 sen. MCE is entering a pivotal growth phase. Years of investment in engineering and technology now position MCE to ride structural shifts in Malaysia’s auto industry towards localisation, high-value electronics and EV adoption, while benefiting from global “China +N” supply chain diversification. Anchored by stable demand from Proton and Perodua and expanding via high-margin electronics, exports and strategic JVs, MCE offers a resilient, scalable play on the sector’s long-term transformation.
Historical return (%)
| 1M | 3M | 12M | |
|---|---|---|---|
| Absolute | -4.0 | 1.4 | -12.2 |
| Relative | -5.3 | 0.7 | -10.0 |
Stock information
| Bloomberg ticker | MCE MK |
| Bursa code | 7004 |
| Issued shares (m) | 140 |
| Market capitalisation (RM m) | 201 |
| 3-mth average volume (‘000) | 96 |
| SC Shariah compliant | Yes |
| F4GBM Index member | No |
| ESG rating | ★★ |
Major shareholders
| Dulcet One Holdings | 16.9% |
| Woo Chiew Loong | 7.4% |
| Goh Kar Chun | 5.5% |
Earnings summary
| FYE (July) | FY24 | FY25f | FY26f |
|---|---|---|---|
| PATMI – core | 20.4 | 20.2 | 21.4 |
| EPS – core (sen) | 14.6 | 14.4 | 15.3 |
| P/E (x) | 9.9 | 10.0 | 9.4 |
Financial Forecast
All items in (RM m) unless otherwise stated
Balance Sheet
| FYE July | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Cash | 9.1 | 15.8 | 52.1 | 54.8 | 60.7 |
| Short term investments | 11.9 | 33.7 | 33.7 | 33.7 | 33.7 |
| Receivables | 27.5 | 21.8 | 23.1 | 28.3 | 32.7 |
| Inventories | 24.2 | 17.7 | 16.0 | 20.4 | 23.8 |
| PPE | 67.8 | 46.7 | 61.0 | 59.9 | 58.9 |
| Others | 88.7 | 102.3 | 83.5 | 82.9 | 82.4 |
| Assets | 161.3 | 191.4 | 208.3 | 220.0 | 233.2 |
| Payables | 25.0 | 38.0 | 37.3 | 41.5 | 45.0 |
| Debt | 13.3 | 14.4 | 24.4 | 22.4 | 20.4 |
| Others | 5.3 | 8.6 | 8.6 | 8.6 | 8.6 |
| Liabilities | 43.6 | 61.0 | 70.3 | 72.5 | 74.0 |
| Shareholder’s equity | 117.8 | 130.0 | 137.7 | 147.3 | 159.0 |
| Minority interest | 0.4 | 0.3 | 0.2 | 0.2 | |
| Equity | 117.8 | 130.4 | 138.0 | 147.5 | 159.2 |
Income statement
| FYE July | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Revenue | 154.9 | 155.7 | 150.0 | 188.0 | 220.0 |
| Operating cost | (133.6) | (133.3) | (124.1) | (159.0) | (183.7) |
| D&A | (4.7) | (4.7) | (4.7) | (7.1) | (7.0) |
| EBIT | 21.3 | 22.4 | 25.9 | 29.0 | 36.3 |
| Finance cost | (1.2) | (0.8) | (0.8) | (0.9) | (0.8) |
| Pretax profit | 20.0 | 21.6 | 25.1 | 28.1 | 35.5 |
| Taxation | (4.3) | (5.7) | (5.0) | (6.7) | (8.5) |
| Minority Interest | 0.0 | 0.1 | 0.1 | 0.1 | 0.1 |
| Reported PATAMI | 15.4 | 16.0 | 20.2 | 21.4 | 27.0 |
| Exceptionals | (1.0) | (4.4) | 0.0 | 0.0 | 0.0 |
| Core PATAMI | 16.4 | 20.4 | 20.2 | 21.4 | 27.0 |
| Basic shares (m) | 139.9 | 139.9 | 139.9 | 139.9 | 139.9 |
Cash Flow Statement
| FYE July | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Profit before taxation | 20.0 | 21.6 | 25.1 | 28.1 | 35.5 |
| D&A | 4.7 | 4.7 | 4.7 | 7.1 | 7.0 |
| Working capital | (1.4) | 18.9 | (0.2) | (5.4) | (4.3) |
| Taxation | (4.3) | (5.7) | (5.0) | (6.7) | (8.5) |
| Others | 1.8 | 2.1 | (0.0) | (0.0) | (0.0) |
| CFO | 20.8 | 41.6 | 24.6 | 23.1 | 29.6 |
| Capex | (4.7) | (11.4) | (19.5) | (6.5) | (6.5) |
| Others | (9.6) | (19.7) | 33.7 | – | – |
| CFI | (14.3) | (31.1) | 14.2 | (6.5) | (6.5) |
| Dividends | (1.5) | (3.7) | (12.5) | (11.8) | (15.3) |
| Others | 0.3 | (0.1) | 10.0 | (2.0) | (2.0) |
| CFF | (1.2) | (3.8) | (2.5) | (13.8) | (17.3) |
| Net cash flow | 5.3 | 6.7 | 36.2 | 2.7 | 5.9 |
| Beginning cash | 3.8 | 9.1 | 15.8 | 52.1 | 54.8 |
| Ending cash | 9.1 | 15.8 | 52.1 | 54.8 | 60.7 |
Valuation ratios
| FYE July | FY23 | FY24 | FY25f | FY26f | FY27f |
|---|---|---|---|---|---|
| Net DPS (sen) | 2.8 | 3.0 | 9.0 | 8.5 | 11.0 |
| Yield (%) | 1.9 | 2.1 | 6.3 | 5.9 | 7.6 |
| Core EPS (sen) | 11.7 | 14.6 | 14.4 | 15.3 | 19.3 |
| P/E (x) | 12.3 | 9.9 | 10.0 | 9.4 | 7.5 |
| Market capitalization (m) | 201.4 | 201.4 | 201.4 | 201.4 | 201.4 |
| Net debt (m) | 4.2 | ||||
| Net gearing (%) | 3.6% | CASH | CASH | CASH | CASH |
| BV / share | 0.8 | 0.9 | 1.0 | 1.1 | 1.1 |
| P/BV (X) | 1.7 | 1.5 | 1.5 | 1.4 | 1.3 |
| ROA (%) | 10.2 | 10.6 | 9.7 | 9.7 | 11.6 |
| ROE (%) | 13.9 | 15.6 | 14.6 | 14.5 | 17.0 |
| Enterprise value | 192.3 | 185.6 | 149.4 | 146.6 | 140.8 |
| EV/EBITDA (x) | 7.4 | 6.8 | 4.9 | 4.1 | 3.3 |
Company Background
Company history
Founded in 1990, MCE Holdings Berhad (MCE) began as a manufacturer of automotive components such as car alarm systems, central locking systems and power window regulators. The company was subsequently listed on the Main Market of Bursa Malaysia in 1997. Over the decades, MCE has evolved into a key Tier-1 supplier, manufacturing and supplying a broad range of OEM automotive electronics and mechatronics components for leading carmakers in Malaysia and the broader regional market.
Existing portfolio
Some of the products it is currently manufacturing include:
- (i) electronics – functional switches, automotive lighting, wireless and usb charger, parking sensor system, camera system, digital video recorder, anti-theft keyless systems
- (ii) mechatronics – power window regulator, plastic parts
Expanding into new electronics
MCE is currently developing new electronic products that are heavily utilised in both electric vehicles (EV) and internal combustion engine (ICE) vehicles. These include infotainment, meter cluster and advanced driver assistance system technologies (ADAS).
Customer segmentation
MCE’s revenue is currently mainly anchored by Malaysia’s two national carmakers, with an estimated 40% contribution from Perodua and another 40% from Proton. The remaining 20% is largely derived from the supply to Toyota for both the domestic and the regional export market. Through its collaboration with Toyota, MCE’s components are exported to a diverse range of international markets, including Thailand, Taiwan, Indonesia, Brazil, and Saudi Arabia, among others.
Industry Overview
Malaysia automotive landscape
National cars – Proton and Perodua
Under the National Automotive Policy (NAP) 2020, the criteria for being recognised as a national car project, formally termed a Malaysian Vehicle Project (MVP), are clearly defined by the Ministry of Investment, Trade and Industry (MITI). Proton and Perodua have been officially confirmed by MITI as meeting all MVP requirements, positioning them as the only two national carmakers eligible for full policy support and incentives under this framework.
Market leadership backed by strategic incentives
Proton and Perodua collectively command over 60% of Malaysia’s total industry volume (TIV), making them the dominant players in the domestic automotive landscape. Their MVP status grants them a suite of powerful fiscal and strategic incentives aimed at encouraging local manufacturing, R&D, and localisation, including:
- Pioneer status: Income tax exemption of 70% to 100% for 5-10 years, depending on the scale and strategic alignment of the investment.
- Investment Tax Allowance (ITA): Covers up to 60% of qualifying capital expenditure, offset against 70% of statutory income.
- Excise duty relief: Eligibility for significant reductions or full exemptions (up to 100%) depending on localisation levels and component sourcing.
Summary of MVP eligibility requirements. (Figure #4)
| Requirement Area | MVP Criteria under NAP 2020 |
|---|---|
| Ownership | Majority Malaysian-owned; private-sector led |
| Supply Chain | At least 75% local vendors |
| R&D & Engineering | Significant local R&D in upper-body or vehicle systems |
| Employment | 98% local workforce |
| Technology Ecosystem | Must align with Next-Generation Vehicle (NxGV), Mobility-as-a-Service (MaaS), and IR4.0 frameworks |
Import tariffs and barriers for foreign brands
In contrast, fully built-up (CBU) vehicle imports from foreign car brands face significant cost and regulatory hurdles in Malaysia. For non-ASEAN countries, CBU vehicles are typically subject to a 30% import duty under the Most Favoured Nation (MFN) schedule. However, under the ASEAN Common Effective Preferential Tariff Free Trade Agreement (ASEAN CEPT FTA), vehicles sourced from member states can enjoy reduced import duties of 0-10%, provided they meet the required regional content thresholds. In addition to import duties, all foreign vehicles, whether from ASEAN or non-ASEAN countries, are subject to steep excise duties ranging from 60% to 105%, depending on engine displacement and vehicle class (e.g. SUV, MPV, passenger car). These layered taxes significantly inflate the retail price of imported cars in Malaysia, effectively acting as a protective barrier for domestic players and enhancing the cost competitiveness of national brands like Proton and Perodua.
Trade barriers for completely built-up car imports (Figure #5)
| Trade barrier | Description |
|---|---|
| Approved Permit (AP) | Quota-based license; caps foreign imports to ~10% of the market |
| Import Duty | 30% standard; 0-10% under ASEAN CEPT (if sourced within ASEAN) |
| Excise Duty | Extremely high-60% to 105% plus 10% sales tax-on CBU vehicles, particularly large engines |
| Gazette Pricing | Government-set valuation for taxation, often exceeding actual transaction prices |
CKU vs CBU difference in Malaysia (Figure #6)
| Feature | CBU Vehicles | CKD Vehicles |
|---|---|---|
| Import Duty (MFN) | 30% | 0-10% |
| Excise Duty | 60-105% | Same rates; more cases of relief |
| Sales Tax | 10% | 0-10% (often exempt or reduced) |
| EV Tax Treatment | Exempt until 2025 | Exempt until 2027 |
Investment Thesis
Technical edge in electronics align with structural industry shift
Stronger value proposition in electronics. While MCE manufactures both mechatronic and electronic car parts, its competitive edge lies in electronic components. These parts demand higher technical expertise, particularly in embedded software, algorithms, and complex engineering solutions. As a result, electronic components generally command higher margins and face less competition compared to mechatronic parts, which are often more commoditised. Moreover, the electronics content in vehicles has grown significantly, from just ~5% of a car’s cost in the 1970s to an estimated 50% by 2030. By deepening its presence in this segment, MCE stands to extract greater value per vehicle over time, aligning itself with the broader transformation of the automotive industry.
Breakthrough entry into EV supply chain
Strategic entry into EV supply chain. On 19 July 2024, MCE secured a landmark RM19.6m contract from Perodua to supply electronic and mechatronic components for an upcoming EV model over a 36-month period, with deliveries beginning in 2QFY26. This was followed by another contract win on 23 April 2025, which includes an estimated ~RM1.9m in value tied to the same EV. Together, these wins mark a pivotal breakthrough for MCE, not only as its first entry into an EV platform, but also for securing its first infotainment system supply contract, a product with significantly higher value per vehicle compared to its traditional offerings. The contracts also provide an initial foothold into the ADAS segment, through the supply of supporting equipment such as cameras and sensors.
Stronger volume upside than contract assumption. The EV model that MCE is supplying for marks Perodua’s first-ever entry into the EV market, with a targeted launch by end-CY25 at an indicative price below RM80k. This pricing strategy positions it as one of the most affordable EVs in Malaysia. Notably, MCE’s contract value of RM21.5m is based on a conservative assumed production volume of 180 units per month. However, based on statements from Perodua’s CEO, the group is targeting monthly production of 500 units, which is 2.8x higher than the contract assumption, suggesting ample room for upside.
Sensitivity analysis of revenue based on Perodua EV car sales (Figure #9)
| Car sales | Expected revenue for 36 months (RM m) | Revenue per year (RM m) |
|---|---|---|
| 180 | 21.5 | 7.2 |
| 500 | 59.7 | 19.9 |
| 1000 | 119.4 | 39.8 |
| 1500 | 179.2 | 59.7 |
Financials
Financial review
MCE’s financial performance underwent a notable improvement starting in FY22, following a period of sustained losses in the years prior. Up until FY21, the group was weighed down by weak sales from its key customer, Proton, which at the time was grappling with declining market share and a less competitive product lineup. Compounding this was MCE’s high operating cost base, driven by substantial investments in human capital, particularly in strengthening its engineering and technical capabilities. The situation was further exacerbated in FY20-21 by pandemic-related disruptions, as production was halted for a cumulative period of five to six months across two rounds of Movement Control Orders (MCOs), further delaying earnings recovery.
However, MCE’s business saw a significant turnaround beginning in FY22 onwards. Revenue grew strongly by +24.8% YoY in FY22 and further accelerated by +46.4% YoY in FY23. This improvement was underpinned by two key factors:
- Proton’s sales recovery, driven by the strategic partnership with Geely. Since the Chinese automaker acquired a 49.9% stake in Proton in 2017, the national carmaker saw notable improvements in product design, technology, and market positioning. These changes translated into stronger vehicle sales in subsequent years, which in turn drove higher component orders for MCE.
- Deeper supply relationship with Perodua. During this period, MCE also secured more component supply programmes from Perodua. This expansion reflected Perodua’s growing trust in MCE’s technical capabilities and delivery track record, which led to a broader scope of parts being awarded.
Key contracts secured by MCE in 2024 – 2025 (Figure #11)
| Announcement date | Awarded by | Contract details | Contract value (RM m) | Duration (months) | Commencement date | Investment cost (RM m) |
|---|---|---|---|---|---|---|
| 20-Jul-24 | Proton | Supply various electronic and mechatronics components including front reading lamp, rear reflector, pull cup handle assembly for Proton vehicle. | 52.1 | 60 | 1QFY26 | 2.2 |
| 23-Apr-25 | Proton | Supply various mechanical and mechatronics components for Proton new car model. | 9.8 | 60 | 1QFY26 | 0.2 |
| 19-Jul-24 | Perodua | Supply various electronic and mechatronics components including multimedia display unit, instrument panel cluster, advanced driver-assistance system, functional switches, interior lightings and more for Perodua new EV. | 19.6 | 36 | 2QFY26 | 12.8 |
| 23-Apr-25 | Perodua | Supply various electronics and mechatronics components for Perodua for an EV model. | 41.3 | 36 | 2QFY26 | 2.5 |
| 23-Apr-25 | Perodua | Supply various electronics and mechatronics components for Perodua for an ICE model. | 72 | 1QFY27 | ||
| 12-Mar-25 | JVIS USA | Supply mechatronics components to JVIS USA LLC for a car model in the USA. | 22.1 | 60 | 1QFY27 | 0.6 |
| 23-Apr-25 | JVIS USA | Supply mechatronics components to JVIS USA LLC for a car model in the USA. | 69.6 | 60 | 1QFY27 | 1.5 |
Valuation & Recommendation
Peers comparison
Closest domestic peer: Betamek. Both MCE and Betamek manufacture automotive electronics (including infotainment). The key differentiator is customer concentration: Betamek’s revenue is predominantly from one OEM (Perodua), while MCE’s base is broadening (Perodua, Proton, Toyota exports, plus US customers like Dorman/JVIS and new JVs). That diversification lowers earnings risk and supports a higher earnings quality as MCE scales into exports and higher-value content.
Regional read-across to gauge upside:
- Minda Corporation (India)—much larger, but strategically similar: expanding in electronic controllers, mechatronics and EV electronics, leveraging localisation, and partnering with global tech players. It offers a roadmap for how MCE could scale its mix and margins as content per car rises.
- Whetron (Taiwan)—focuses on active safety/ADAS sensors, cameras and parking systems for global OEMs (Honda, Toyota, Ford, GM, Mazda, Nissan).
- E-Lead (Taiwan)-strong in infotainment, HUD, AVM and safety electronics.
Peers comparison – financials (Figure #12)
| MCE | Betamek | Minda Corp | Whetron Electronics | E-lead electronics | |
|---|---|---|---|---|---|
| Information for FYE | 31-Jul-24 | 31-Mar-25 | 31-Mar-25 | 31-Dec-24 | 31-Dec-24 |
| Listing market | Main market, Bursa | Ace Market, Bursa | Bombay Stock Exchange National Stock Exchange of India | Taipei Exchange | Taiwan Stock Exchange |
| Revenue (RM m) | 155.7 | 238.3 | 2457.8 | 746.5 | 658.1 |
| PBT (RM m) | 21.6 | 32.0 | 162.1 | 35 | 66.1 |
| PBT margin | 13.9% | 13.4% | 6.6% | 4.7% | 10.0% |
| Net gearing | Net cash | Net cash | 56.7% | 15.5% | Net cash |
Peers comparison – valuation (Figure #13)
| Price (local) | Market cap (RM m) | TTM P/E | Latest P/B | |
|---|---|---|---|---|
| MCE | 1.45 | 202.83 | 10.5 | 1.19 |
| Betamek | 0.43 | 193.50 | 7.5 | 1.29 |
| Minda | 461.65 | 5,343.80 | 44.2 | 5.01 |
| Whetron | 50.2 | 557.00 | 19.3 | 1.91 |
| E-lead Electronics | 40.6 | 709.22 | 12.3 | 1.89 |
| Simple average | 18.8 | 2.26 |
HLIB Research, closing price as at 7 Aug 2025
Right place at the right time
We initiate coverage on MCE with a BUY rating and a TP of RM2.40, based on 15x PE on mid-FY27 partially diluted EPS of 16 sen.
We believe MCE is approaching a defining inflection point. After years of deliberate investment in engineering talent and technology development, the group is now strategically positioned to capitalise on a wave of structural changes in the automotive landscape. Multiple earnings catalysts are set to unfold over the next few years, ranging from new EV-related contracts to high-value electronics, exports, and non-automotive ventures, that will collectively elevate MCE’s earnings profile to a new level.
Malaysia’s auto industry is entering a new phase, with national policy shifting decisively toward localisation and high-value, high-tech manufacturing. As CBU imports gradually give way to CKD assembly, and localisation efforts extend deeper into complex, compact electronic components, MCE’s specialised expertise places it in the sweet spot of this transition. In our view, MCE is poised to become a key enabler of Malaysia’s next wave of automotive industrialisation, helping anchor a supply chain increasingly defined by smart systems, electronics, and value-added content.
Lastly, unlike automakers, which face relentless competition, short product cycles and constant reinvestment needs, component manufacturers like MCE offer a more resilient and attractive exposure to the automotive value chain. Once a supplier is embedded into an OEM programme, switching is rare due to strict qualification processes, engineering integration and cost considerations. For MCE, its core customers Proton and Perodua, which together command over 60% of Malaysia’s domestic market share provide a stable and resilient earnings base. This is in contrast to foreign OEMs in the domestic market whose sales are typically more volatile and competitive. This strong domestic anchor allows MCE to build incremental growth through new customer wins and diversification into export markets. In a landscape where car brands may gain or lose market share rapidly, quality component suppliers with a technical edge and an expanding customer base like MCE are well positioned to benefit regardless of which OEM comes out ahead. As such, we believe MCE offers a smarter and more stable way to participate in the structural growth of the automotive industry.
