Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD
Research House: OSK
Proton Holdings Bhd
(Aug 24, RM4.73)
Maintain buy at RM4.66 with unchanged target price of RM5.67: Proton's 1Q2011 ended June 30 net profit of RM84.7 million was within estimates, while revenue continued to be on an up-trend as exports picked up speed year-on-year (y-o-y) and domestic sales remained encouraging.
Proton continued to chalk up favourable profit-before-tax (PBT) margins of 4.6% for the quarter (4QFY2010: 5.08%), thanks to the better operating environment.
Although we think 1Q may have been negatively impacted by a glitch in distribution, the company has over the past year been marked by improving production efficiency and higher sales productivity achieved from the consolidation of its distribution network.
As we continue to see volume on a rising trend, we expect margins to remain sustainable going forward. As such, we expect overall PBT for the year to perk to 5.2% for FY2011.
Model launches are expected this year with the rebadged Lancer replacing the aging Waja, sometime end-CY2010. The Persona replacement is also due to hit the roads in November 2011.
While volume will remain sustainable given the new models, we see the upcoming Perodua Myvi replacement, which will be due for mass production in early 2H, to pose a threat to Proton.
However, despite a challenging market, we are still optimistic about Proton's export contribution from China. Proton has increased its completely-knock-down production capacity to 50,000 units per year. We forecast export volume to grow by 28% over the next two years.
With our earnings unchanged, we continue to retain our RM5.67 target price for Proton based on FY2011 EPS pegged at nine times PER and maintain our 'buy' call.
Proton is still trading at depressed levels given the long-term uncertainties plaguing the automaker. But over the short term Proton will see a turnaround as exports increase progressively. ' OSK Research, Aug 24
This article appeared in The Edge Financial Daily, August 25 2010.
Company Name: PROTON HOLDINGS BHD
Research House: OSK
Proton Holdings Bhd
(Aug 24, RM4.73)
Maintain buy at RM4.66 with unchanged target price of RM5.67: Proton's 1Q2011 ended June 30 net profit of RM84.7 million was within estimates, while revenue continued to be on an up-trend as exports picked up speed year-on-year (y-o-y) and domestic sales remained encouraging.
Proton continued to chalk up favourable profit-before-tax (PBT) margins of 4.6% for the quarter (4QFY2010: 5.08%), thanks to the better operating environment.
Although we think 1Q may have been negatively impacted by a glitch in distribution, the company has over the past year been marked by improving production efficiency and higher sales productivity achieved from the consolidation of its distribution network.
As we continue to see volume on a rising trend, we expect margins to remain sustainable going forward. As such, we expect overall PBT for the year to perk to 5.2% for FY2011.
Model launches are expected this year with the rebadged Lancer replacing the aging Waja, sometime end-CY2010. The Persona replacement is also due to hit the roads in November 2011.
While volume will remain sustainable given the new models, we see the upcoming Perodua Myvi replacement, which will be due for mass production in early 2H, to pose a threat to Proton.
However, despite a challenging market, we are still optimistic about Proton's export contribution from China. Proton has increased its completely-knock-down production capacity to 50,000 units per year. We forecast export volume to grow by 28% over the next two years.
With our earnings unchanged, we continue to retain our RM5.67 target price for Proton based on FY2011 EPS pegged at nine times PER and maintain our 'buy' call.
Proton is still trading at depressed levels given the long-term uncertainties plaguing the automaker. But over the short term Proton will see a turnaround as exports increase progressively. ' OSK Research, Aug 24
This article appeared in The Edge Financial Daily, August 25 2010.
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