• Sime Darby’s wholly-owned Sime Darby Motors Malaysia was appointed as BYD’s distributor in Malaysia, after both parties signed a distribution agreement. BYD is a China-based automobile manufacturer specialising in electric vehicles (EVs).

• This news came as no surprise as Sime Darby has been collaborating with BYD in Singapore since 2019. From the agreement, 2 BYD models that have been confirmed for introduction to the Malaysian market are the Atto 3 (crossover) and e6 (MPV).

• While the near-term sales of EVs are likely to remain insignificant due to prohibitive pricing and lack of charging infrastructure, we believe this is a step in the right direction for Sime Darby. This will help to diversify the group’s brand portfolio while adding a well-established EV brand to its stable.

• Based on its 324,000 EV sales in 1HCY22, BYD the second largest BEV manufacturer globally after Tesla. The company also sold more than 300,000 plug-in hybrids during the same period. If we include this, BYD is the world’s top seller of electrified vehicles. Doubling down on its EV vision, BYD recently ended production of its conventional internal combustion engine vehicles in March this year.

• We made no changes in our core earnings forecasts as sales of the BYD models to the group’s earnings are likely to remain immaterial in the near-term. Maintain BUY and fair value of RM2.88.

Source: AmInvest Research - 29 Sept 2022