KUALA LUMPUR: Sime Darby Bhd's core earnings of RM1.5 billion for financial year 2024 (FY24) came in below Hong Leong Investment Bank's (HLIB Research) expectation at 94 per cent but within consensus at 105 per cent.
HLIB Research expects Sime Darby to sustain its FY25 performance, driven by its industrial segment with a RM4.25 billion orderbook and full-year contribution from UMW, cushioning the deteriorating motor segment.
Margins for the industrial segment are poised to sustain strong demand for maintenance and overhaul services.
"Demand for construction and engine equipment in Malaysia and Singapore has been improving due to construction and data centre projects," said HLIB Research.
However, the group's motor segment may weaken in FY25, dragged by the continuous competitive China market conditions with heavy price discounting, while for the Malaysia market, sales may normalise after a strong FY24 showing, and the Australia market may remain weak.
Sime Darby Bhd closed its FY24 with a net profit that more than doubled over the previous year and remains bullish over its long-term prospect in China.
The group's impressive earnings were more or less blighted by losses of its motor operations in mainland China.
Sime Darby posted a net profit of RM3.31 billion for the 12 months ended June 30, 2024, up from RM1.46 billion in FY23, thanks largely to a RM2 billion gain from selling Ramsay Sime Darby Health Care in December 2023.
HLIB Research maintained "buy" on the stock with a lower target price of RM3.05 from RM3.28 previously.