Financial Highlights

The summary of the combined statements of profit or loss and other comprehensive income for the Financial Periods Under Review is as follows:

• The revenue increased from RM 58 million in FYE 2021 to RM 116 million in FYE 2022 but dropped to RM 114 million. The decrease in revenue is mainly due to lower revenue generated from the body parts.

• The GP margin increased from 8.04% in the FYE 2021 to 14.74% in the FYE 2022 but decreased to 12.40% in FYE 2023. The drop in GP margin was primarily due to higher utility expenses and labour expenses.

• The PAT margin increased from 0.26% in FYE 2021 to 7.57% in FYE 2022 and dropped to 4.85% in FYE 2023.

• The gearing ratio is 0.16 in FYE2023, which is below the benchmark. This indicates that the company still has room to increase its debt further, indirectly suggesting that in the event of any crisis, the company will not easily face risks due to excessive debt.  (A good gearing ratio should be between 0.25 – 0.5). 

Major customers and suppliers

The group is dependent on Customer Group A, who contributed more than 25.00% of the Group’s revenue in each of the Financial Periods Under Review; PHN Companies and Autokeen Sdn Bhd which contributed more than 10.00% to the Group’s revenue in each of the Financial Periods Under Review; as well as Ingress Technologies Sdn Bhd, who contributed more than 10.00% to the Group’s revenue in the FYE 2021 and FYE 2022 and FPE 2024. As their collective contribution in the Financial Periods Under Review accounted for more than 85.00% of the Group’s revenue, if any one of them ceases to engage the group, they may experience a significant reduction in sales, which could result in a loss of revenue, given that they may not be able to replace these customers with new customers or with additional sales from existing customers in a timely manner. Additionally, their revenue from these major customers fluctuated over the Financial Periods Under Review, whereby further details are set out in Section 12.3.2 (i) of this Prospectus.

Further, as the parts and components are ultimately supplied to the local automotive manufacturers, namely Proton and Perodua, for assembly into complete automotive vehicles, if any of the major customers, who are the Tier 1 Suppliers/Manufacturers of the local automotive manufacturers, cease to operate or fail to secure new projects/contracts with the local automotive manufacturers, the group may approach other Tier 1 Suppliers/Manufacturers of the local automotive OEMs who have been awarded the new projects/contracts. As such, they will be able to replace the lost of any of the major customers as long as they continue to maintain good track record in the industry as a trusted parts and components manufacturer, along with on-going enhancement in the manufacturing capability to meet the customers’ requirements and fulfil orders in a timely manner. 

Therefore, the group believes that with continuous improvement in their engineering expertise and manufacturing capabilities, maintenance of the product quality, timely delivery and cost competitiveness as well as the long-term business relationship with their customers, they will be able to continue securing sales from their customers.

Major Suppliers

Whether they purchase steel materials from approved steel suppliers or from their customers, the type of steel materials required for the manufacturing of automotive parts and components are discussed and determined directly between the local automotive manufacturers and approved steel suppliers, and shared with their respective Tier 1 Suppliers/Manufacturers. Steel materials required are ultimately sourced from the same group of approved steel suppliers by the local automotive manufacturers, whereby the steel materials required are generally available. If there are shortages of supply from any approved steel suppliers, they will source the steel materials from other approved steel suppliers of the local automotive manufacturers. In addition, the major customers as well as the local automotive manufacturers who the group supplies automotive parts and components to, are invested to ensure there are no supply shortages or delays that will lead to any delays in the fulfilment of their orders. Therefore, they are not dependent on the major suppliers.

Industry Overview

The growth and outlook of the automotive parts and components industry is driven by the size and growth of the automotive industry. The size of the automotive industry in Malaysia is represented by total industry volume (“TIV”), which refers to new passenger vehicles and commercial vehicles registered in Malaysia. On average, passenger vehicles contributed 89.63% of the TIV in Malaysia from 2017 to 2023, and the remaining 10.37% was contributed by commercial vehicles. 

The TIV of the automotive industry in Malaysia increased at a compound annual growth rate (“CAGR”) of 2.37% from 576,625 units to 604,287 units from 2017 to 2019. Pursuant to the outbreak of COVID-19 pandemic, the TIV decreased 12.37% year-on-year (“YOY”) to 529,514 units in 2020, and further decreased by 3.89% YOY to 508,911 units in 2021. This was mainly due to operational restrictions and shortages of labour faced by the industry during the movement restriction periods. Further, supply chain challenges and rising cost of freight caused shortages of certain automotive parts and components (e.g. semiconductor chips), which in turn disrupted production.

Economic downturns caused by the COVID-19 pandemic also caused a decline in demand as consumers were more prudent in spending. Nevertheless, this impact was cushioned by the sales tax exemption4 implemented by the Government which continued to drive sales of passenger vehicles amidst the COVID-19 pandemic. The TIV recovered by 41.71% YOY to 721,177 units in 2022, supported by the reduction in COVID-19 cases, the transition to endemic phase and fulfilment of order backlogs as production activities normalised. In addition, the recovery of the economy had also stimulated demand. In 2023, the TIV grew by a further 10.89% YOY to 799,731 units, mainly due to fulfilment of pent-up car bookings, resilient domestic economy and improved supply chain environment. 

In terms of passenger vehicles, the TIV increased from 514,675 units in 2017 to 550,179 units in 2019 at a CAGR of 3.39%. Pursuant to the outbreak of the COVID-19 pandemic, TIV of passenger vehicles dropped by 12.58% to 480,971 units in 2020, and further decreased by 5.89% to 452,663 units in 2021. Subsequently as operational restrictions were lifted, the TIV of passenger vehicles increased by 41.86% from 452,663 units in 2021 to 642,157 units in 2022, surpassing pre-pandemic levels. In 2023, TIV of passenger vehicles increased further by 11.99% YOY to 719,160 units, which was boosted by favourable economic conditions and new vehicle model launches. 

Notwithstanding the all-time high TIV recorded in 2023, the MAA forecasts TIV of the automotive industry in Malaysia to normalise from 799,731 units in 2023 to 765,000 units in 2024, and the TIV of passenger vehicles to also normalise from 719,160 units in 2023 to 696,150 units in 2024. This is mainly due to global economic uncertainties and the anticipated dampening of consumer spending resulting from expectations of rising cost of living. However, the demand for passenger vehicles is expected to be supported by the increasing disposable income of the Malaysian population attributed to economic recovery as well as the car-centric culture in Malaysia moving forward. For more details on the factors supporting the demand for passenger vehicles, please refer to Chapter 3.1 Key demand drivers of this IMR Report. 

Perodua is the highest selling vehicle brand in Malaysia, with market share by TIV ranging from 37.39% to 41.58%, between 2017 and 2023. On the other hand, prior to 2019, Proton was the third largest contributor (i.e. 13.79% market share) and fourth largest contributor (i.e. 10.81% market share) to the TIV in 2017 and 2018 respectively. In 2019, Proton became the second highest selling vehicle brand when its market share contribution to the TIV increased to 16.58% following the launch of its new X70 model in December 2018. From 2019 to 2023, Proton has maintained its market share as the second largest contributor to the TIV in Malaysia. Collectively, the market share of the local automotive manufacturers, namely Perodua and Proton, increased from 53.60% in 2017 to 60.18% in 2023, dominating the automotive industry in Malaysia.

Key demand drivers

• Introduction of new vehicle models and localisation of parts and components drives the automotive parts and components industry

• Economic recovery and increasing disposable income drive the demand for passenger vehicles, in turn driving the automotive parts and components industry

• Car-centric culture in Malaysia drives the growth of the automotive industry, which in turn benefits automotive parts and components manufacturers

• Government initiatives to drive the automotive industry

Key industry risks and challenges

• The automotive parts and components industry is dependent on the performance of the automotive industry

• The automotive industry as well as the automotive parts and components industry face risks arising from political, economic, social and regulatory changes

• Competition from other industry players

Market share

KHPT Group captured a market share of approximately 0.41%, computed based on its revenue of RM114.08 million in the FYE 2023 against the manufacturing sales value of metal parts and accessories for motor vehicles of RM27.58 billion in Malaysia in 2023.

Future plans and strategies for KHPT HOLDINGS BERHAD

The Group’s future plans and strategies are summarised as below:

1. The group intends to expand their manufacturing capacity by setting up a new automated body parts production line.

2. The group will renovate their TPG Factory to accommodate the installation of new machinery and equipment.

3. The group intends to purchase an additional overhead crane to accommodate their expansion in manufacturing capacity.

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Opportunities

1. The Group’s parts and components are mainly used by local automotive manufacturers (i.e. Proton and Perodua) for the assembly of Proton and Perodua cars respectively. 

2. The growth of the Group is backed by the dies solution and process engineering capabilities. 

Risk 

1. The group is dependent on certain major customers.

2. The group is dependent on the availability of technical personnel for the design and manufacturing processes of the parts and components.

3. The group relies on the performance of automotive market in Malaysia, specifically the demand for Proton and Perodua vehicles.

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