PETALING JAYA: The industrial division is expected to remain a key earnings driver for Sime Darby Bhd
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This is despite some concerns over Malaysia’s new electric vehicle (EV) policy, which could weigh on its automotive business, according to RHB Research.
“We remain positive on the stock, as we continue to highlight its industrial segment as the key earnings driver, alongside potential recovery from China,” RHB Research said.
Effective July 1, all imported completely built up (CBU) EVs will be required to have a minimum cost, insurance and freight (CIF) value of RM200,000 and a minimum power output of 180 kilowatts.
RHB noted that after taxes of about 25% for China-imported EVs, the policy effectively translates into an on-the-road price of roughly RM250,000 before distributor margins.
“This signals a blanket requirement for all CBU EVs in Malaysia, whether existing or upcoming,” the research house added.
RHB Research has maintained its “buy” call and target price of RM2.55 on Sime Darby, implying about 16% upside alongside an indicative dividend yield of around 6%.
It argued that the valuations remain attractive while a recovery in China could provide additional support.
The new rules are expected to disrupt the broader mass-market EV segment, especially China-based brands such as BYD, which has been a contributor to Sime Darby Motors’ recent growth.
It pointed out that among Malaysia’s top 20 EV models, only five would remain unaffected by the new requirements, with two of those being local models.
The research house said most BYD models sold locally are priced below the new CIF threshold and fall short of the minimum power output requirement – potentially reducing the incentive for Sime Darby to aggressively market the established brand domestically.
In the financial year 2025 (FY25), BYD recorded sales of 10,271 units, accounting for about 38% of Sime Darby Motors’ sales volume.
Assuming similar volumes are lost over FY26 to FY28, it is estimated that the impact of this could likely reduce Sime Darby’s earnings by around 6% annually and therefore trim its target price by approximately 5%.
The Sime Darby Motors division contributed to 11% of the group’s FY25 revenue and pretax profits.
The research house further cited potential room and space for policy negotiations and possible good support measures from BYD.
“There may be room for further negotiations given the nature of the abrupt policy shift, and this would likely be counterproductive towards Malaysia’s EV target of 20% of new car sales by 2030,” RHB Research added.
