KUALA LUMPUR: Tan Chong Motor Holdings Bhd
will likely continue to experience pressure from heightened competition in the local automotive space.
It is also affected by the strong US dollar, higher logistics and input costs.
Analysts continued to remain cautious on its prospects given this operating landscape.
Tan Chong’s core net loss of RM30.9mil in the recently reported first quarter results was wider than most analysts’ expectations.
Despite lower car sales in the country, the group was supported by ongoing cost cutting measures and higher contributions from financial services.
Hong Leong Investment Bank Research (HLIB Research) said it remained cautious on the group’s domestic market outlook due to the stiff competition in various segments of the market as Tan Chong’s peers introduce new attractive models along with discounting and promotional activity.
“The emergence of Chinese makes in the domestic market has also contributed to stiffening competition. Nevertheless, the possible launch of the Nissan Kicks e-Power B-segment sport utility vehicle in the second half of this year is expected to improve Nissan’s sales volume,” it said.
According to local automotive websites, compared with conventional hybrids, Nissan’s e-Power system offers a quieter and more refined driving experience as its intelligent control system also regulates the engine’s entire operation based on speed, road conditions and battery level.
The Kicks e-Power competes with Honda’s HRV model in other markets
“The strong US dollar, higher logistics and material costs will also continue to affect Tan Chong’s margins in the coming quarters,” HLIB Research added.
It maintained its “sell” rating on Tan Chong with an unchanged target price of 65 sen based on a 12 times price-earnings ratio tagged to financial year 2025 (FY25) earnings.
The research house noted its concerns about the group’s continued weak sales volume and stiff competition.
Commenting on Tan Chong’s recently reported quarter, Kenanga Research said the first quarter losses had more than doubled year-on-year as sales volume of its bread-and-butter Nissan vehicles continued to fall.
However, Kenanga Research said it expects losses to potentially narrow in FY24 and FY25 and raised its target price by 3% to 74 sen, but maintained its “underperform” call on the stock.
For its first quarter ended March 31, 2024, Tan Chong reported a net loss of RM15.72mil, on revenue of RM563.7mil.
In a filing with Bursa Malaysia following its latest financial results, Tan Chong said it would continue with more customer-centric engagement programmes.
“As part of the group’s efforts to offer innovative driving technology, the group is on schedule to introduce new models in the second half of 2024 that will revolutionise a new way of driving.
“Separately, our first floating large-scale solar photovoltaic plant in Serendah, Selangor commenced operations in January 2024 and will contribute positively to our revenue stream.”
Moving forward, Tan Chong said it remained steadfast in its focus of building a sustainable business by driving better operational efficiencies, prudent management of its resources to navigate the challenging times ahead and deliver long-term operational and financial sustainability.
