DRB-Hicom (DRB) reported a headline net loss of RM100.1m for 4QFY22. The quarterly loss was mainly due to impairment loss on assets in certain subsidiary companies, coupled with lower contribution from its automotive division and higher loss from Postal and Service segment. Nonetheless, the Group performed well for FY22 as it achieved an annual net profit of RM187.7m against annual loss of RM296.4m in FY21. Excluding one-off items, the Group’s cumulative FY22 core net profit came in at RM244.7m. The results beat our but below consensus expectations, accounting for 111% and 87% of our and consensus full year estimates, respectively. The discrepancy in our forecasts was largely due to better-than-expected performance of its Automotive segment. We revised our forecast for FY23-24F by 10-11% to account for higher vehicle sales. As such, our sum-of-parts (SOP) based TP is revised to RM2.10 (previously RM1.95) as we rollover our valuation to FY24. We continue to like the Group’s prospects, underpinned by its on-going turnaround and transformation initiative. We retain our Outperform call on DRB.
- Revenue increased by 5.4% YoY to RM4.4bn in 4QFY22, mainly attributed to higher revenue across all business segments except for the postal and logistic business. The Automotive segment recorded higher revenue (+1.9% YoY) mainly from PROTON, automotive distribution and manufacturing & engineering. The Aerospace and Defense (A&D) segment recorded higher revenue (+97.8% YoY) on higher delivery of defense products and aircraft parts following the recommencement of international flights. The Banking segment posted higher revenue attributed to the increase in financing volume along with a rise in the Overnight Policy Rate. However, this was partly offset by lower revenue from the Postal segment (-19.8% YoY) due to decline in the courier business as overall parcel volume decreased, especially from contract customers.
- Pretax Loss of RM73.1m recorded in 4QFY22 compared to pre-tax profit of RM153.4m in 4QFY21. The quarterly loss was mainly due to impairment on assets in certain subsidiary companies amounting to RM176.5m. This was exacerbated by lower profit from Automotive segment due to product mix as well as higher losses from Postal and Services segments. Nevertheless, this was partly offset by better contribution from A&D segment as CTRM recorded higher delivery of aircraft parts and DEFTECH delivered the remaining 26 units of AV8 (100% completion).
- Outlook. 2022 TIV surged 46% YoY to a new record of 720k units on low base effect from lockdowns and strong demand driven by SST exemption measures. While car sales are poised to remain strong in 1Q 2023 on the back of high order backlogs and the Ministry of Finance’s (MOF) decision to extend the vehicle registration deadline to 31 March 2023 to enable car buyers who booked their vehicles by 30 June 2022 to still enjoy the sales tax exemption. However, the longer-term outlook for Malaysia’s auto sector appears to be mixed. TIV is likely to taper off once SST-exempted bookings are exhausted by March 2023. MAA is projecting a lower TIV of 650k in 2023F (-9.7% YoY) considering expiry of SST holiday, ongoing supply constraints and rising interest rate environment dampening consumer confidence. In addition, some automakers have raised prices in Jan 2023 to account for higher material, component and electricity cost. Nevertheless, government’s decision to defer new open market value (OMV) excise duty regulations by two years from 2023 to 2025 helps contain the rise in car prices. Meanwhile, sustain demand for new vehicle expected to be cushioned by new exciting models and various promotional measures such as partially absorbing SST, sales discount, attractive financing etc.
Source: PublicInvest Research - 22 Feb 2023