Soft demand forecast to affect Tan Chong

Maybank IB Research expects Tan Chong’s local vehicle sales to remain low.

PETALING JAYA: Tan Chong Motor Holdings Bhd’s earnings are expected to remain soft in the quarters ahead, due to weaker demand for its model line-ups and rollouts.

Maybank Investment Bank (Maybank IB) Research said the market response for its Malaysian vehicle sales was underwhelming, with a decline of 33% year-on-year (y-o-y).

“Sales were below pandemic levels a year ago (despite selling during the sales and service tax holidays up to end-March 2023), while its overseas operations remain loss-making,” the research house said in a report yesterday.

Maybank IB Research stated it expects financial year 2023 (FY23) to be loss-making, compared with a RM40mil increase previously, with a deeper cut (67% to 69%) to its FY24 to FY25 estimates.

For the first quarter of 2023 (1Q23), Tan Chong registered a core net loss of RM15mil (versus RM0.4mil in 1Q22). Weaker local vehicle sales and auto operations, as well as the continuing losses at its Vietnam operations were the main factors driving the company’s underlying y-o-y weakness.

Moreover, Maybank IB Research opined that Tan Chong’s local vehicle sales will remain low, on top of the still challenging and volatile operating landscape for its overseas operations.

This is reflected in the research house’s earnings revision for the company from FY23 to FY25.

Maybank IB Research maintained a “sell” call on Tan Chong with a target price of 88 sen.

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