On the right track

The vehicle sales tax exemption, which is supposed to expire at the end of next month, has helped boost local vehicle sales and cushion the impact of the Covid-19 pandemic.

PETALING JAYA: UMW Holdings Bhd’s automotive segment is expected to continue performing strongly, driven by an anticipated tax holiday extension and steady sales performance from 38% associate, Perodua.

The vehicle sales tax exemption, which is supposed to expire at the end of next month, has helped boost local vehicle sales and cushion the impact of the Covid-19 pandemic.

JF Apex Securities said it anticipates the sales tax exemption to be further extended by the government to December 2021, taking into account the impact of the global chip shortage on the automotive market.

“Furthermore, the Malaysia Automotive Association has forecast that total industry volume will be growing 8% in 2021 and 6% in 2022, ” it said in a report yesterday.

Additionally, the research house said Perodua’s sales performance is expected to remain strong, due to the continuous demand for entry-level vehicles and various government incentives.

Separately, MIDF Research noted that UMW has unveiled a strategic framework called “Crest 2021, ” which aims to double the group’s revenue to RM20bil, as well as expand pre-tax profit and net profit to RM2bil and RM1bil respectively by 2030.

“This is expected to encompass both organic and non-organic growth, with expansion focused on adjacent and complementary businesses to the current core units.

“Broadly, the group foresees reduced dependency on autos (to reduce to between 65% and 70% of earnings mix), with equal contribution from the equipment and manufacturing and engineering segments.”

Strong auto sales helped bump up UMW’s net profit in its first quarter ended March 31,2021.

The group’s net profit during the quarter more than doubled year-on-year (y-o-y) to RM97.3mil from RM44.3mil in the previous corresponding period.

Revenue surged by 39.4% y-o-y to RM2.95bil on higher contribution from the automotive and equipment segments.

In a filing with Bursa Malaysia on its first quarter results, UMW said it anticipates the introduction of new models and the low interest-rate environment to help propel its sales momentum for the year.

To mitigate the shortage of semiconductor chips in the industry, UMW said it is exploring various avenues and is working closely with its principals and suppliers for alternative sources of semiconductor chips.

The first quarter saw UMW’s automotive segment revenue jumping y-o-y by 51.1% to RM2.40bil.

Meanwhile, its equipment segment’s revenue rose by 15% to RM332.5mil for the quarter, mainly due to higher demand for products and services for both the local and overseas operations.

MIDF Research said UMW’s first quarter earnings were within expectations.

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