TCHONG: Automotive Group Reports In-Line Q2 Results Amid Persistent Challenges, ‘SELL’ Rating Maintained
| Investment Bank | MBSB RESEARCH |
|---|---|
| TP (Target Price) | RM0.34 (-41.4%) |
| Last Traded | RM0.58 |
| Recommendation | SELL |
MBSB Research reported that Tan Chong Motor Holdings Berhad’s 2QFY25 results aligned with market expectations, with the automotive group continuing to navigate a challenging landscape marked by persistent losses. The research firm has maintained its “SELL” recommendation on the stock, with the target price unchanged at RM0.34.
Performance Review
The company posted a core Loss After Tax and Minority Interest (LATAMI) of -RM32.7 million for the second quarter of FY25. This brings its first-half FY25 total LATAMI to -RM76.9 million, which is in line with both MBSB Research’s and consensus full-year forecasts, having achieved 49% of the projected losses. Group revenue experienced a marginal year-on-year decline of 1.2%.
The core automotive segment’s revenue saw a slight year-on-year decrease of 0.5%, primarily attributed to intensified competition within the domestic market.
Regional Dynamics and Challenges
Malaysia’s revenue contribution continued to slip, declining by 7.4% year-on-year, exacerbated by a sharp 31.2% year-on-year contraction in Nissan’s total industry volume (TIV). This weakening performance contributed to a significant margin compression, resulting in a sharper 22.2% year-on-year decline in core LATAMI compared to 2QFY24.
In contrast, Vietnam demonstrated robust growth, with revenue contribution surging 3.3x, largely supported by the expanding footprint of the GAC Motor brand in the region.
Sequentially, the group’s revenue dipped by 2.6% quarter-on-quarter. However, core LATAMI showed some sequential improvement, narrowing by 26.1% quarter-on-quarter, partly aided by lower tax expenses. An RM54.0 million fair value gain on investment properties recorded in 1QFY25 was explicitly excluded from core loss calculations for analytical purposes.
Future Outlook and Recommendation
MBSB Research has kept its earnings projections unchanged, reflecting ongoing caution. While the introduction of TQ Wuling in Malaysia is slated for launch in 4QFY25, initial contributions are expected to be modest. The investment bank continues to anticipate that the group will remain loss-making throughout its forecast horizon, citing an absence of major compelling new launches or strategic initiatives to drive a significant earnings recovery.
Consequently, MBSB Research maintains its “SELL” rating for the company. The unchanged target price of RM0.34 is based on FY26F PBVS of 0.1x, reflecting the lack of imminent catalysts for an earnings turnaround.
