PETALING JAYA: Despite intensifying Chinese competition, Hong Leong Industries Bhd
(HLI) should be able to sustain its growth by expanding its Yamaha Genuine spare parts and higher margin big-bikes businesses, and sticky brand loyalty.
Following record profits for the year, Kenanga Research said HLI remained well-placed to uphold volume and revenue growth, underpinning continued profitability amid ongoing expansion of Chinese motorcycle manufacturers in Malaysia.
According to the research house, HLI’s spare parts business is seen as a strategic pillar supporting long-term earnings growth and sustainability.
The company aims to introduce a second Yamaha Genuine Parts brand, positioned as a value-for-money alternative, to capture a larger share of the Malaysian motorcycle spare parts market, which is worth an estimated RM2bil to RM3bil annually.
“This should enable HLI to compete more effectively against lower-priced aftermarket and non-genuine spare parts, which currently account for a substantial portion of the market,” Kenanga Research said.
“Given that HLI’s current spare parts revenue is estimated to be in the region of RM200mil, even a modest increase in market penetration could provide a meaningful growth runway.”
As part of its growth strategy, HLI also intends to expand its big bike segment, which currently makes up 25% of the Malaysian market, from RM300mil to RM500mil share of revenue over the next two to three years.
The plan is to start with completely built-up big bike imports with smaller niche volume, while pushing for completely knocked-down localisation for its higher volume top selling models, the research house said.
In the next two to three years, HLI is set to introduce 15 to 17 models with attractive pricing within their respective target market range.
Additionally, its digital customer loyalty reward platform, coming online by the end of 2026, is expected to further increase brand loyalty and retain market share, Kenanga Research said.
While Chinese motorcycle players have expanded aggressively in Malaysia, it said demand is largely concentrated among price-sensitive customers, and a sizeable customer segment still prefers Yamaha motorcycles due to their proven quality, reliable after-sales service, and strong resale value.
Meanwhile, HLI’s non-core tiles segment should see improved earnings, as it expands into large-format porcelain slabs and doubles manufacturing capacity.
“Large-format porcelain slabs command higher selling prices and better margins, while strengthening Guocera’s position in the premium building materials segment,” the research house said.
The tiles division currently generates about RM220mil to RM250mil in annual revenue.
“Currently contributing less than 5% of total sales, large-format tiles are targeted to account for approximately 25% of total sales within the next three years.”
Kenanga Research noted that Guocera’s expansion is aimed at enhancing value for a later divestment, as it had been at risk of falling into losses due to rising operating costs. It has maintained an “outperform” call on the stock with an unchanged target price of RM21.
The research house said it continues to favour HLI as a strong proxy to the booming gig economy, its association with the market-leading Yamaha motorcycle brand in Malaysia and a solid war chest with net cash of RM2.1bil.
