Drb-hicom to reap benefits from Proton’s better performance

KUALA LUMPUR: With Proton’s better performance this year and the company expected to be in the black, Drb-hicom Bhd is expected to reap the benefits.

Aminvestment in its latest research note said Proton’s plans to locally assemble the X70 in its Tanjung Malim plant remains on track with an initial local content of at least 30 per cent and the group plans to increase the local content to 70% to 80% by 2023.

“We deem this positive as this will result in lower costs and mitigate foreign exchange fluctuations in the manufacturing of the X70 in the long run, leading to better profitability margins for the famed SUV,” it said,

It also said the introduction of the X50 Complete Knocked-down (CKD) in the second half of next year is expected to further boost sales of Proton and based on its current results, Proton has registered positive earnings for the past two quarters.

“We reckon that this was due to the compelling sales volume thanks to the well-received new launches in 2019 of the X70, Iriz, Persona and Saga,” it said.

Proton’s year-to-date total sales volume stand at 69,700 units compared with 49,200 units in the first eight months last year, which equals to a 42% year-on-year growth.

“Combined with the sustained strong momentum of the aforementioned volume-based models, we expect Proton to be back in the black in the full financial year of 2019.

“We strongly believe that Proton’s turnaround is slowly but surely becoming a reality through its impressive sales volume momentum as the group regains consumers’ confidence and trust in the Proton brand,” it said.

Drb-hicom is the majority stakeholder in the national car maker owning 50.1%, while China’s automotive titan Zhejiang Geely Holding Group Co Ltd holds the remaining 49.9% stake.

The note also added that besides Proton, drb’s defence arm Deftech is also currently negotiating new contracts.

“Deftech’s contract to supply AV-8 armoured tanks will be ending soon, in 2020. Drbhicom’s management guided that new contracts are currently being negotiated with the Malaysian military. However, there were no details on the product types. We believe no problem would arise in securing new contracts as Deftech remains the local monopoly to supply defence equipment and vehicles to the Malaysian army,” it said. — Bernama