KUALA LUMPUR (March 5): Tan Chong Motor Holdings Bhd, which mainly assembles Nissan-branded vehicles, will remain in the red this year amid an onslaught of headwinds, AmInvestment Bank flagged on Tuesday and told investors to "underweight" the stock.

AmInvestment is forecasting a net loss of RM57.6 million for Tan Chong in financial year 2024 (FY2024) and cautioned that its share price will remain under pressure if the ringgit stays weak against the US dollar. The research house also noted escalating competition in the industry with the entry of various Chinese car models.

Tan Chong "will still be loss making", AmInvestment said in a note. Industry data showed that the company lost market share in January and "we have yet to see the recovery momentum picking up", it said.

Shares of Tan Chong have plunged 17% in 2023 and are barely higher year-to-date as the company racked up net losses for the fourth consecutive year. The stock was down two sen or 2% at 98 sen at 4.40pm, valuing the car company at RM658 million on Bursa Malaysia.

A majority of five out of seven analysts covering Tan Chong rated the stock "sell" with the remaining two recommending a "hold" call. The median 12-month target price stood at 78 sen, a potential of over 20% from current share price.

Tan Chong's inventory has swelled to a four-year high of RM822 million at the end of 2023, largely due to built-up stock of Nissan Navara. "This is a popular model, and we think TCM (Tan Chong) should be able to pare down on its inventories quickly," AmInvestment said.

AmInvestment stressed that new car model launches are key to drive sales and for Tan Chong to turn around. "Forward visibility, however, is low" as Tan Chong's management was reluctant to share more details on upcoming model launches, it noted.

Nevertheless, the problems faced by Tan Chong are "structural and require a deep restructuring of the underperforming business segments", AmInvestment added.

Tan Chong reported a net loss of RM54.85 million for the three months ended Dec 31, 2023, while total net loss for the year ballooned to RM128.74 million from RM51.11 million.