PETALING JAYA: Sime Darby Bhd, which saw its net profit dip by 18.7% in the third quarter ended March 31, 2022, is in for challenging times in the near term.

       Headwinds like China’s zero-Covid policy and inflationary pressures could dent its earnings for the year, analysts said.

       CGS-CIMB Research said amid a softer economic outlook in China, ongoing supply chain disruptions and inflationary cost pressures, it is downgrading the group from an “add” to “hold” with a lower RM2.40 target price in view of a projected weaker financial year 2022 (FY22).

       However, the research house said Sime Darby still offers a decent 4.6% to 5% calendar year 2022-2023 forecast yield.

       The conglomerate’s net profit dipped 18.67% to RM244mil in the third quarter, from RM300mil in the corresponding quarter last year.

       Group revenue decreased by 4.1% to RM10.57bil in the third quarter from RM11.02bil in the same period a year ago.

       For the nine-month period, net profit was down to RM825mil from RM1.21bil previously.

       “We see mixed fourth-quarter prospects for the group due to a subdued industrial division outlook, given the extended lockdowns in China and unfavourable sales mix in Australia but stronger motors earnings in the quarter, driven by dividend income from its 49%-owned BMW Malaysia and healthy order backlog.

       “The potential sale of Ramsay Sime Darby Healthcare (RSDH) is positive for the group to unlock the value of its healthcare assets,” CGS-CIMB said.

       Sime and its partner Ramsay Health Care have received a takeover offer from IHH Healthcare to acquire RSDH for a conditional enterprise value of US$1.35bil (RM5.67bil). The research firm said it currently values Sime Darby’s 50% stake in RSDH at RM1.8bil

       Sime and its partner Ramsay Health Care have received a takeover offer from IHH Healthcare to acquire RSDH for a conditional enterprise value of US$1.35bil (RM5.67bil).

       The research firm said it currently values Sime Darby’s 50% stake in RSDH at RM1.8bil, based on 36 times calendar year 2023 forecast price-earnings.

       Meanwhile, RHB Research said it expects China motor sales and margins to be weak in the fourth quarter, due to lockdowns in that country and potential excess inventory from the lack of demand.

       However, it anticipates motor sales rebounding strongly after lockdowns are lifted, partially fuelled by Beijing’s new auto tax relief.

       As for the Australasia, it believes industrial margin weakness should not last beyond the fourth quarter of this year and this unit should recover thereafter, given its strong RM3.9bil order book.