PETALING JAYA: Sales momentum at DRB-Hicom Bhd’s automotive division is expected to continue in 2022 and this would be driven by new launches from Proton and Honda marques.

       Losses are also expected to narrow at its subsidiary, Pos Malaysia Bhd, while there could be new contract wins for its unit, DRB-Hicom Defence Technologies Sdn Bhd, according to analysts.

       The appreciation of the ringgit against the US dollar is also seen as a potential rerating catalyst for the stock.

       CGS-CIMB Research expected Proton Holdings Bhd and Honda Malaysia to deliver 15% and 30% sales volume growth respectively in the financial year (FY) 2022.

       The group is expected to turn profitable in FY22 in view of the pick-up in economic recovery.

       This is in line with the country’s high vaccination rate and easing of economic restrictions which have fuelled the recovery in other segments, namely logistics, aerospace, banking and services.

       The research firm said Proton is able to maintain its growth momentum in FY22 as this is driven by a healthy order backlog, launches of a new sport-utility vehicle and Saga facelift, plus higher contribution from the export markets.

       It said DRB-Hicom’s 34%-owned Honda Malaysia is projecting an 80,000 (up 51% year-on-year) sales volume in FY22 on the back of two new launches – the City hatchback and HRV.

       The sales tax holiday for passenger vehicles is likely to be extended until June 22, helping to increase sales volume in 2022.

       On the back of this factor, the research house raised its FY22-FY23 earnings per share by 4% to 13% to account for the higher contribution from the automotive segment.

       It also upgraded the stock to an “add’’ from “hold’’ with a higher target price of RM1.70 a share.

       However, it pointed out that the extended disruptions in the auto supply chain due to the Covid-19 pandemic, widening losses at Pos Malaysia as a result of intense competition, decline in its market share, and any depreciation of the ringgit against US dollar, as key downside risks for the stock.

       The automotive segment was the key driver on the back of 9.9% year-on-year revenue growth in FY21.

       This was due to the higher contributions from Proton, auto distribution as well as auto components segments, which grew 9%, 78% and 6% respectively.