CIMB Research keeps DRB-Hicom a Hold at RM2.74

KUALA LUMPUR: CIMB Equities Research says the National Automotive Policy (NAP) to be unveiled this month is expected to walk the fine balance between opening up the car industry to non-national manufacturers to make Malaysia an ASEAN production hub for energy-efficient vehicles (EEVs).

It said on Monday that on the other hand, the NAP would be continuing to protect Proton in the conventional bread-and-butter segment, as  represented by the popular Proton SAGA SV, which now accounts for half of its unit sales.

“While we believe the NAP is potentially exciting for the non-national  car segment, we cannot see it being a win-win situation for Proton as well, which appears to have been relegated to making low-end cars for the domestic market,” said the research house.

CIMB Research said DRB-Hicom’s internal target of doubling unit sales to 350,000 units per annum by 2018 is crucial for it to stay relevant “but the target is based on the key premise of breaking into export markets, which we believe is unlikely”.

“Avoid exposure to Proton/DRB. We favour the non-national car segment via  Tan Chong Motors. We have been previously positive on Proton going into private hands in DRB but the low-hanging fruit in cost cutting has not materialised and we believe it will be loss making if not for the RM200mil in government R&D grants received every year,” it said, as it maintained its Hold recommendation on DRB-Hicom at RM2.74. 
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