HIL’s 9MFY23 results beat expectations on stronger-than-expected sales of auto parts to Perodua. To reflect our recent upgrade in Perodua’s vehicle sales in CY23 and CY24, we raise our FY23-24F net profit forecasts for HIL by 16% and 4%, respectively. Consequently, we lift our TP by 5% to RM0.91 (from RM0.87) and upgrade our call to MARKET PERFORM from UNDERPERFORM.
HIL’s 9MFY23 results beat expectations at 94% and 97% of our full-year forecast and the full-year consensus estimate, respectively. The variance against our forecast was from stronger-than-expected sales of auto parts to its major customer, Perodua.
YoY. HIL’s 9MFY23 revenue grew 20% underpinned by: (i) a 12% top line growth at its manufacturing segment on strong sales of auto parts to its major customer, Perodua (unit sales rose 19% to 233,277 units), and (ii) a 39% top line growth at its property segment on the back of strong take-up for its Amverton townhouses (70% sold as at Sep 2023) and terrace houses in Sg Buloh (99% sold as at Sep 2023).
Its core net profit rose by a steeper 40% thanks to better margins from auto parts supplied to new car models, i.e. Perodua Axia and Alza.
QoQ, HIL’s 3QFY23 revenue rose 20% driven by a stronger manufacturing top line (+42%) on full utilisation of production capacity to cope with strong orders from its major customer, Perodua (unit sales rose 7% to 38,794 units) coupled with the absence of long festive holidays. This more than more offset weaker property revenue (-4%), which typically fluctuates from one quarter to another. Consequentially, its core net profit rose 10%.
Forecasts. We raise our FY23-24F net profit forecasts by 16% and 4%, respectively, to reflect stronger vehicle sales assumptions for its major customer, Perodua of 325k units (from 314k units) and 330k units (from 320k units), respectively.
Correspondingly, we raise our SoP-derived TP by 5% to RM0.91 from RM0.87. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see page 5).
We like HIL for: (i) robust demand for its manufacturing division underpinned by strong orders for auto parts especially for new car models, i.e. Perodua Axia and Alza, upcoming models i.e. Perodua D66b with auto part order backlogs currently ranging from two to six months, depending on which customers, and (ii) its healthy pipeline of property projects. However, we are mindful of HIL inherently having little bargaining power with its customers, i.e. large auto makers. This puts it in a precarious situation on a rising cost environment. Value has emerged after the recent weakness in its share price. Upgrade to MARKET PERFORM from UNDERPERFORM.
Risks to our call include: (i) weaker-than-expected demand and prices for auto parts, (ii) rise in input costs, and (iii) a prolonged slowdown in the property market.
Source: Kenanga Research - 24 Nov 2023
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Created by kiasutrader | Aug 23, 2024
Created by kiasutrader | Aug 23, 2024