PETALING JAYA: The engines of recovery are in motion for Sime Darby Bhd
, despite persisting headwinds for its vehicles division.
CIMB Research, which foresees earnings recovery for Sime Darby in its financial year ending June 30, 2026 (FY26), said the industrial division is on track for margin improvement.
The earnings recovery is also set to be driven by Sime UMW, formerly known as UMW Holdings Bhd, which was fully acquired last year for RM5.84bil.
UMW’s automotive division includes two of Malaysia’s popular car brands: Toyota and Perodua.
In FY25, UMW contributed 24% of group revenue.
“We project net profit growth of 9.1%, 6.3% and 5.9% in FY26, FY27 and FY28, respectively, driven by the recovery in the industrial segment, sustained contributions from UMW, and improved cost control in the vehicles division.
“We maintain our ‘buy’ rating with a higher target price of RM2.24, after factoring in Sime Darby’s stronger balance sheet,” CIMB Research said.
Meanwhile, Hong Leong Investment Bank Research (HLIB Research) raised its earnings forecasts for FY26 by 10.6% and FY27 by 4.2%, post-higher margin adjustment for the industrial segment, given the positive outlook.
The research house noted that the division’s order book remained high at RM4.5bil with 56.9% of it attributed to the Australian mining sector due to profitable commodity prices.
On the vehicles division, the research house said the performance is mainly supported by the strong Singapore market on higher Certificate of Entitlement quotas and increasing demand for electric vehicles. Other markets are expected to remain weak.
“Nevertheless, the expected support from BMW and implementation of China regulatory control policies may potentially lift the market,” the research house said.
HLIB Research also pointed out that Sime’s core net profit came in strong at RM486mil for the fourth quarter of FY25, up 32.5% year-on-year and RM1.37bil for the full year.
The result came in above both HLIB Research’s FY25 forecast and consensus estimates, mainly driven by the strong performance of the industrial and UMW segments.
“We maintain a ‘buy’ recommendation but with a higher target price of RM2.50 from RM2.12.
“Sime Darby will continue to leverage the strong momentum of its Industrial segment, driven by mining customers in Australia for FY26.
“Besides, the stock offers an attractive 13 sen per share dividend payout, yielding 6.8% for FY26 to FY27,” the research house added.
Contrary to other research houses, RHB Research cut its earnings forecast for FY26 and FY27 by 9%, respectively, as it cut margins and volume assumptions for Sime’s Darby’s vehicles segment.
“For FY26, expect muted growth in the vehicle segment, especially luxury marques, reflecting softer consumer sentiment and continued oversupply in China.
“This should be partly cushioned by strong Perodua sales via UMW. On tariffs, Sime guided that direct impact will be limited as its China operations are largely domestic, though indirect supply chain effects cannot be ruled out,” the research house said.
RHB Research has a “buy” call on Sime Darby, with a lower target price of RM2.10 per share.
