DRB reported core PATMI RM216.6m for 4QFY21, which significantly lowered FY21 LATMI to -RM50.7m. The result was above both HLIB’s expectation and consensus, mainly due to strong automotive recovery and lower than expected core losses of Pos. We expect DRB group to continue ride on the economy recovery in 2022, especially for automotive segment (which enjoy SST extension to June 2022). We maintain BUY with unchanged TP: RM2.30, based on 25% discount to SOP: RM3.06 as we expect DRB to leverage onto Proton’s growth momentum.

Above expectation. DRB reported core PATMI RM216.6m for 4QFY21 (vs. 3QFY21: LATMI -RM162.3m; and 4QFY20: PATMI +RM6.9m), which lowered FY21’s core LATMI to -RM50.7m. We deem the results above HLIB’s FY21 expectation of LATMI -RM150.0m and consensus -RM233.0m. The strong 4QFY21 was mainly driven by strong automotive segment and lower than expected core losses of Pos. EIs for FY21 include unrealised forex loss of -RM53.8m, PPE & intangible write off/impairments of -RM250.0m and Pos’s mutual separation scheme of- RM75.1m.

QoQ. Returned to core PATMI of RM216.6m (from core LATMI of -RM162.3m in 3QY21), mainly due accelerated deliveries of cars and recovery of overall group business activities during the quarter as compared to previous quarter’s being affected by strict lockdown measures until Aug and only gradually opened up in Sep month.

YoY. Core PATMI improved to RM216.6m (from RM6.9m), mainly driven by stronger contribution from automotive segment (especially from Proton).

YTD. Core LATMI improved to -RM50.7m (vs. -RM331.2m in FY20), mainly due to stronger contributions from automotive segment on higher car sales volume (Proton, Mitsubishi & Isuzu) and Bank Muamalat.

Automotive. With the extended SST exemptions to Jun 2022, we expect DRB to continue enjoy strong automotive sales volume, especially for its highly demanded Proton X50 model and upcoming new model launches by the group. We also expect Proton to again step up pace on its export program in 2022 into regional market. Proton’s CKD plant in Pakistan has already commenced operation recently. Proton has set a sales target of 150k units for 2022, while Honda’s sales target at 80k units.

Pos. Pos is expected to leverage on the opening up of businesses and borders, which would increase demand for consumer products, manufacturing parts and cargo volume. However, we remain cautious on PosM’s courier business which is facing stiff competitions. On-going turnaround plan are being implemented, focusing primarily on rigorous cost efficiency and customer centric strategy to improve its overall performance.

Others. Banking, aerospace and properties segments are expected to benefit from the gradual recovery of the economy and opening of border in 2022.

Forecast. Unchanged.

Maintain BUY, TP: RM2.30. Maintain BUY with unchanged TP: RM2.30, based on unchanged 25% discount to SOP: RM3.06. We remain positive on DRB’s outlook on strong automotive sales growth, leveraging on SST exemptions and attractive model line-up from Proton, Honda and Mitsubishi. DRB also has a strong leverage onto the robust growth momentum of Proton.

Source: Hong Leong Investment Bank Research - 25 Feb 2022