PETALING JAYA: The measures announced in Budget 2025 regarding the trade-in of old cars and the end of excise duty exemptions on completely built-up (CBU) electric vehicles (EVs) are expected to indirectly benefit MCE Holdings Bhd
.
Hong Leong Investment Bank (HLIB) Research believes the removal of tax exemptions, coupled with the RM4,000 incentive for trading in old cars to purchase new national makes, will stimulate demand for Proton and Perodua vehicles.
The research house noted that the policy shift will make CBU EVs more expensive, thereby enhancing the competitiveness of completely knocked-down (CKD) EV models, particularly Perodua’s upcoming locally assembled EV.
“Given Perodua’s dominant market presence, strong pricing advantage, and extensive distribution network, its EV model is well positioned to capture a significant share of the domestic EV market once launched. This trend bodes well for its local auto parts suppliers, including MCE, which is supplying high-value infotainment and advanced driver assistance systems components for the Perodua EV,” HLIB Research said in its latest report on MCE.
The end of the duty exemption, the research house added, is likely to accelerate the localisation of components by automakers, benefiting MCE due to its established capabilities in high-value automotive components.
“Over the medium term, this shift is expected to broaden MCE’s customer base, as more CKD EV producers localise their supply chains to meet incentive criteria and improve cost competitiveness,” it explained.
Currently, MCE derives 80% of its revenue from Proton and Perodua. The RM4,000 trade-in offer could translate into higher national car sales, supporting MCE’s growth.
HLIB Research noted that if the incentive successfully accelerates the vehicle replacement cycle, it could sustain higher production volumes over multiple years, strengthening MCE’s revenue visibility in the medium term.
Despite identifying potential tailwinds from Budget 2025, HLIB Research has maintained its “buy” call and target price of RM4.20 per share for MCE.
The valuation is based on a 15 times earnings multiple on mid-financial year 2027 (FY27) partially diluted earnings per share of 16 sen.
MCE’s balance sheet remains robust, with a net cash position of RM73.3mil or 50.5 sen per share, providing ample flexibility for growth investments and shareholder returns.
The stock also offers an attractive projected FY26 dividend yield of 5.3%, anchoring downside support while investors await an earnings inflection in FY26.
