HIL Industries Bhd
(Feb 12, 58 sen)
Maintain hold with an unchanged target price (TP) of 75 sen: Manufacturing sales will continue to drive revenue growth, supported by strong demand from local auto manufacturers like Perusahaan Otomobil Kedua Sdn Bhd (Perodua) and Proton Holdings Bhd, as well as other key customers like Honda and Toyota. Some slowdown is expected in China as Covid-19 keeps factories closed although the impact on HIL Industries Bhd’s bottom line is expected to be minor for now. Meanwhile, progress billings from the property division are expected to remain steady amid healthy take-ups of HIL’s development projects.

Moving forward, we foresee improved bottom line margins, buoyed by stronger revenue and better production efficiency. We expect HIL’s 2019-2020 earnings to expand at a double-digit growth rate, while five-year compound annual growth rate is estimated to grow at high single digits of 8.4% to RM25.8 million in 2020. Balance sheet also remains robust as the group maintains its net cash position, ensuring sufficient funds for working capital and potential expansion plans.

We maintain our “hold” recommendation on HIL Industries Bhd with an unchanged TP of 75 sen as we maintain a cautious stance on this stock owing to the unabated depression in the property market that will limit any stock price uptrend potential over the near to medium term. — Malacca Securities, Feb 17