TCHONG: Automotive Group Faces Headwinds Amid Modest Uplift, Analysts Maintain SELL Rating
| Investment Bank | MBSB RESEARCH |
|---|---|
| TP (Target Price) | RM0.34 (-34.6%) |
| Last Traded | RM0.52 |
| Recommendation | SELL |
An automotive group’s recent 2QFY25 results briefing revealed a mixed outlook, characterized by a modest uplift from upcoming product launches but persistent challenges. Despite some positive developments, MBSB RESEARCH has maintained its SELL recommendation with an unchanged target price of RM0.34, reflecting a cautious stance due to the absence of a clear profit turnaround.
Performance Overview
The company’s 2QFY25 results indicated a modest uplift, primarily driven by the anticipated launch of its first TQ Wuling model in 4QCY25. However, analysts do not expect this new model to serve as a meaningful volume driver in the near term, tempering optimism. The broader financial outlook remains challenging, with earnings forecasts for EBIT, PBT, and Core PATAMI projected to remain negative through FY26F.
Operational Challenges and Strategic Initiatives
Operational efficiency remains a key concern, with the Serendah and Segambut plants reportedly operating below expected utilization levels. The Serendah facility is dedicated to the Nissan brand, which currently holds a market share of less than 1% in Malaysia’s total industry volume (TIV). The Segambut plant, responsible for Foton and GAC Motor assembly, is poised for improved utilization with the scheduled production of the TQ Wuling Bingo, a compact electric hatchback, set to commence in October 2025.
In product development, a facelifted Navara X-Tremer was introduced in August 2025. Looking ahead, two new Nissan e-POWER models, speculated to be the X-Trail and Serena based on regional launches, are expected to be launched next year, though details remain unconfirmed.
Regional Expansion and Product Pipeline
Regionally, the Vietnamese market stands out as a bright spot. Unit sales more than doubled year-on-year and increased by 10.2% quarter-on-quarter, largely fueled by the growing presence of GAC Motor since its 3QFY24 launch. The GAC lineup in Vietnam includes the GS8 (D-segment SUV), M8 (E-segment MPV), and M6 Pro (C-segment MPV). Discussions are ongoing with the principal regarding a potential CKD (Completely Knocked Down) conversion, which could include export opportunities from Malaysia.
Landbank Policy and Financial Outlook
The monetization of the Group’s substantial landbank is not guaranteed to be a recurring income source and will be pursued selectively on an opportunistic basis. While further disposals or joint ventures are possible, land essential to plant operations will be retained. Despite the strategic initiatives and regional growth, MBSB RESEARCH has maintained its earnings forecasts as unchanged, reinforcing the view that a significant profit turnaround is not yet on the horizon, thus sustaining the SELL recommendation.
