Proton has set an ambitious sales target of 500k units by 2035 (vs. a target of >142k units in 2023), riding on Geely‘s extensive brands and partnerships. It has also set a target of 50% of its total production being “new energy vehicles” by 2035. We maintain our forecasts, TP of RM1.45 and MARKET PERFORM call.

We recently visited DBRHCOM Proton’s integrated manufacturing complex in Tanjung Malim, Perak, that houses its: (i) trim & final assembly station (ii) paint shop station, (iii) body sub-assembly, (iv) main body assembly station, (v) GEP3 TGDI engine assembly plant (for the X-models and future models), and (vi) D-Line stamping shop.

Built within a sprawling land area measuring 1,280 acres, the Tanjung Malim plant is 5x the size of Proton’s older plant in Shah Alam. It resembles UMW Toyota’s Bukit Raja plant with an in-house GEP3 1.5 TGDI engine assembly shop (first started in Jun 2022 and using 30% local contents), ground-bolt machineries (cost efficient, safer and scalable), flexible jigs (allowing the assembly of different car models in the same production line) and a roof-top design that harnesses natural light and solar panels.

Proton’s massive investment in the Tanjung Malim plant, comprising RM4b in 2018-2023 and another RM6b in 2024-2030, will drive the transformation of the area into an “automotive city” dubbed Automotive Hi-Tech Valley (AHTV) with land size of 4,000 acres, spearheaded by DRBHCOM. The initiative will involve a total investment of RM32b comprising Proton’s investment in its Tanjung Malim plant as mentioned, investment by part suppliers and the development of commercial and residential properties and amenities such as a hospital.

Proton’s production capacity currently stands at 330k units annually, comprising 250k units in Tanjung Malim and 80k units in Shah Alam. It produces Persona, Iriz, X70, X50, X90 and GEP3 TGDI engine out of its Tanjung Malim plant, and Saga, Exora and VVT Campro engine out of its Shah Alam plant. It reiterated its plan to consolidate its entire manufacturing activities in Tanjung Malim and cease operations in Shah Alam by 2027.

Proton has set an ambitious sales target of 500k units by 2035 (vs. a target of >142k units in 2023), with equal split between domestic sales and exports, riding on Geely‘s extensive brands and partnerships. To-date, Geely group operates many notable global and regional brands including Geely Auto, SMART, Emgrand, Volvo Cars, Lotus, Lynk & Co, Farizon, Radar, LEVC, Livan, and Polestar. It has also set a target of 50% of its total production being “new energy vehicles” by 2035.

Meanwhile, Proton will put onto the local market SMART #1 EV, a joint venture between Geely and Daimler, in 4QCY23, and all-new Proton sedan CKD by end-2023 which are being produced in its Tanjung Malim plant.

Forecasts. Maintained.

We also maintain our sum-of-parts (SoP)-derived TP at RM1.45 (see Page 3). There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 5).

Source: Kenanga Research - 16 Oct 2023