KUALA LUMPUR: APM Automotive Holdings Bhd
registered one of its weakest quarters with core earnings declining 74% year-on-year (y-o-y) to RM3.4mil in Q2FY17.
After excluding various one-offs, cumulative H1FY17 core net profit was 47% lower y-o-y at at RM13.9mil, which was below Affin Hwang Capital Research's and consensus estimates.
"H1FY17 revenue came in at RM569.6mil (-2% y-o-y) as the suspension, interior and plastics and electrical and heat exchange segments posted y-o-y declines. The lower operating margin (-1.3ppt) and a higher effective tax rate resulted in a lower overall core net profit which declined 47% y-o-y," the research house said in its Tuesday report.
Revenue for the suspension segment declined from RM55.7mil in 2Q16 to RM47.8mil in 2Q17 affected by lower off-take from the OEMs, as certain models reached the tail end of their lifespan,
The interior and plastics segment revenue fell 11% y-o-y to RM178.4mil on lower demand for OEM parts as a result of the production shutdown following the festive season in July 2017.
Lastly, revenue for the electrical & heat exchange segment was down 12.2% y-o-y to RM33.7mil due to lower sales activities and demand.
Affin Hwang Research has slashed its FY17-19 earnings forecast by 23% to 44% owing to the lower margins. It has maintained its "sell" call and lowered APM's target price to RM3 from RM3.55.
Key upside risks to the business would include a rebound in consumer sentiment and spending leading to a strong pick-up in vehicle sales.
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