PETALING JAYA: UMW Holdings Bhd expects to sustain its earnings for the financial year 2022 (FY22) by leveraging on the anticipated economic recovery as well as sales and tax exemptions for the automotive sector.

       The group reported better-than-expected results for its first quarter with net profit rising 27% year-on-year (y-o-y) to RM101mil, which was ahead of analysts’ consensus estimates.

       MIDF Research noted that there were slightly better-than-expected volumes at its unit UMW Toyota and higher-than-projected margins across all divisions.

       The research house revised upwards its FY22 and FY23 earnings forecast marginally by 6.1% and 6.4%, respectively, implying a 45% y-o-y earnings growth, to be primarily driven by the auto and equipment divisions.

       It believes that UMW is one of the prime beneficiaries of a cyclical recovery in the automotive sector, given its dominant market share of 52% held via UMW Toyota and Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

       Its equipment division, meanwhile, will benefit from the recovering business momentum, higher construction activities and rising commodity demand.

       The research house has a “buy” recommendation on the counter, with a target price of RM4.35 a share.

       The outstanding orders at UMW Toyota and Perodua combined is well above 100,000 units currently, which can last the group well into the third quarter of 2022.

       Despite the recent upward price revisions in April 2022 (to reflect pre-tax holiday pricing and cost pass-on), order rates so far had not receded, which is a positive indicator of underlying demand momentum, said the research house.

       It added that UMW Toyota is contemplating another price hike in the later part of the year should the US dollar remain strong and this could impact the group from August onwards.