DRB-HICOM Berhad (DRBHCOM) has reported disappointing financial results for the first half of the fiscal year 2024 (1HFY24), with core net profit plunging by 44% year-on-year, primarily due to wider sequential losses in its postal segment and an increased effective tax rate. Analysts have maintained a MARKET PERFORM call on the company, cutting the target price to RM1.30, a reduction of 7% from the previous RM1.40.
The company's core net profit, excluding one-off items, totalled RM12 million, representing only 28% and 27% of both the full-year forecast and consensus estimates, respectively. The disappointing results were driven by significant losses in the postal segment, which struggled due to an unfavourable business environment. Overall revenue for 1HFY24 remained relatively flat compared to the previous year, negatively impacted by a 5% decline in automotive sales, with Proton, Mitsubishi, and Isuzu all reporting lower sales volumes. In addition, postal services experienced a 3% dip, attributed to a slowdown in online shopping and reduced demand from major e-commerce players, while revenue from property and other segments dropped by 25%.
Despite these challenges, certain segments performed well. The banking sector saw a 28% increase in financing income from Bank Muamalat, while aviation services grew by 8% alongside an increase in flight numbers managed by Pos Aviation. The aerospace and defence sector also reported a 26% rise, thanks to higher product deliveries.
In comparison to the previous quarter, DRB-HICOM's revenue for the second quarter of FY24 (2QFY24) fell by 13%. This decrease was largely driven by a 17% decline in automotive sales, exacerbated by the closure of its automotive plant during the extended festive holidays, along with a similar decline in postal services and a staggering 67% drop in the properties and other segments. The company's core net profit turned into a loss of RM15 million in 2QFY24, a sharp decline from a profit of RM85 million in the preceding quarter.
Analysts at Kenanga have adjusted their profit forecasts for FY24 and FY25 downwards by 21% and 10%, respectively, reflecting the ongoing challenges faced in the postal segment. Despite these adjustments, the target price has been trimmed only slightly, reflecting a more forward-looking valuation approach.