PETALING JAYA: Hong Leong Industries Bhd
(HLI) is expected to see earnings growth, supported by expansion initiatives in two of its segments – tiles and motorcycles.
In a report, CGS International (CGSI) Research said the motorcycle distributor is improving its sales mix through the introduction of additional big bike models to expand its market share in Malaysia’s big bike segment.
“The premium nature of this segment should support a richer sales mix and margin expansion over financial year 2026 (FY26) to FY28F, in our view,” the research house noted.
It added that motorcycle sales are likely to grow in FY27 on the back of strong demand, coupled with election-related liquidity and a reduction in petrol subsidy quota.
“Historically, motorcycle sales have recorded year-on-year growth during election years, based on our analysis of Road Transport Department (JPJ) data,” CGSI Research said.
The research house also said that local research and development capabilities have enabled Yamaha to achieve over 50% market share in Malaysia versus circa 8% globally, highlighting the group’s strong execution and competitive positioning.
It said this should continue to support the group’s market share gains.
Furthermore, Yamaha’s new automated large-format tiles factory is on track, which has lifted average selling prices by about 20%, according to the group.
CGSI Research said this could widen margins and drive earnings growth.
Meanwhile, HLI has expressed interest in mergers and acquisitions (M&A), and is actively looking for opportunities.
“The group is actively on the lookout for M&A opportunities across both adjacent and non-adjacent business segments, targeting scalable businesses that carry capital value and have a sizeable profit base, although the timing of any acquisition remains uncertain,” CGSI Research said.
The research house said the group has the potential to raise its dividend to more than RM1 per share, driven by earnings growth prospects and a strong net cash position equivalent to about 30% of its market capitalisation.
CGSI Research reiterated its “add” call on the stock with a target price of RM26.30.
The stock is trading at a calendar year 2026 forecast ex-cash price-to-earnings ratio of only 6.9 times.
“We see potential for valuation re-rating under Bursa Malaysia’s Value Up Programme. Re-rating catalyst include (a richer) premium product mix, continued Yamaha market share gains, while risks include rising Chinese competition and weaker-than-expected motorcycle demand,” it highlighted.
HLI posted a higher net profit of RM138.37 million for its third quarter ended March 31, 2026.
