KUALA LUMPUR (Dec 3): CGS-CIMB Securities Sdn Bhd has retained its "add" call on DRB-Hicom Bhd with an unchanged sum-of-parts-based target price (TP) of RM2.35.

This is based on better-than-expected sales volume at Proton Holdings Bhd, earnings turnaround at Pos Malaysia Bhd, and potential gains from landbank and hospitality asset disposals as potential rerating catalysts.

However, it added that widening losses by Pos Malaysia, lower volume delivery at Proton and supply chain disruptions from the Covid-19 outbreak were downside risks.

In a company note, the stockbroking company said DRB-Hicom expects Proton's positive sales momentum to continue in the fourth quarter of 2020 due to the ongoing sales tax holiday and new model launches.

"The group has indicated that Proton X50 and Honda City have received impressive market response with over 30,000 and 9,000 bookings, respectively. Proton is ramping up production and targeting to produce 3,500 to 4,000 units per month of X50 and 2,500 to 3,000 units per month of X70 at its Tanjung Malim plant in December 2020," it said.

Additionally, the group's automotive manufacturing and engineering division expects stronger component demand in financial year 2021 (forecast), driven by higher sales at Proton, Perodua and Honda.

"Moreover, DRB-Hicom has also started production assembly of Mitsubishi Xpander multipurpose vehicle in Pekan and is looking to produce about 6,000 units per annum," it said.

CGS-CIMB said Proton's transformation remains on track as the national carmaker aims to reach 30% domestic market by 2027, compared with its current market share of 21% as of October this year.

Meanwhile, the stockbroking outfit said DRB-Hicom is also optimistic about Pos Malaysia's turnaround prospect in 2021 (forecast), which is driven by stronger contribution from courier services on the back of robust e-commerce demand.