KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) Research has almost halved Tan Chong Motor Holdings Bhd's target price and raised loss projections for the financial year 2024, as sales volume suffers.
The bank-backed research firm cut its target price to 35 sen, from 65 sen previously, maintaining its "Sell" call on the stock.
It also adjusted forecasts for FY24 to a loss of RM158.3 million, from a loss of RM98.4 million previously, on concerns over continued weak sales volume amidst deteriorated market conditions.
Tan Chong provides assembly, sales and distribution, after sales and financial products for Nissan, Infiniti and Renault in Malaysia.
Tan Chong is also involved in distributing and assembling Nissan vehicle in Vietnam, Myanmar, Cambodia and Laos.
Tan Chong reported core loss after tax and minority interest (LATMI) of RM55.6 million in the third quarter if financial year 2024 (3QFY2024) (vs. -RM30.8 million in 2QFY24; -RM40.1 million in 3QFY23), which further dragged nine month FY24 (9MFY24) to -RM117.3 million (vs. -RM95.9 million in 9MFY23).
This was below HLIB Research's and consensus expectation.
"Despite the upcoming new launch of Nissan Kicks, we remain cautious on the group's domestic market outlook, due to the ongoing stiff competition for the various segments as both national marques and non-national original equipment manufacturers (OEMs) introduce new attractive models," it said.
"In Vietnam, we expect improving sales following the commencement of GAC distributorship in 2HFY24. Recent ringgit appreciation is expected to improve the cost structure of its Malaysia operations," the research unit said.
HLIB Research expects losses for the group to continue through FY25, with it only expected to turn a corner in FY26.
Tan Chong's share price was down one per cent to 49 sen, giving it a market capitalisation of RM332.6 million.