Kuala Lumpur: Sime Darby Bhd is poised to leverage its robust industrial segment in 2025, bolstered by a substantial order book and the full consolidation of UMW Holdings Bhd, according to analysts.
According to BERNAMA News Agency, Hong Leong Investment Bank Bhd (HLIB Research) anticipates that Sime Darby's earnings will remain stable in the second half of 2025, supported by a record-high order book of RM4.8 billion as of December 2024. Australia plays a significant role, accounting for 56.1% of the order book, primarily due to the mining sector and profitable commodity prices. In Malaysia, the order book is expanding due to increased infrastructure projects and the demand for power and energy equipment driven by the growing development of data centers.
The sustainability of the UMW segment is expected to be anchored by Perodua's associate performance, with Toyota and Perodua setting ambitious 2025 sales targets of 90,000 and 345,000 units, respectively. HLIB Research has maintained a "buy" call on Sime Darby, with a target price of RM2.65.
RHB Investment Bank Bhd (RHB IB) also reiterated a "buy" recommendation with a target price of RM3.05, remaining positive about Sime Darby's industrial division. However, it noted that ongoing price reductions in parts might impact the company's performance in the latter half of 2025. The automotive segment could experience volume normalization in line with a cyclical downturn outlook, but this is expected to be mitigated by a healthy contribution from UMW, with Perodua and Toyota as part of its offerings. RHB IB adjusted its financial year 2025-FY2027 earnings forecast upwards by 6.0%, 4.0%, and 4.0%, respectively, citing higher taxes and minority interest.
Kenanga Investment Bank Bhd continues to favor Sime Darby for its market share in Malaysia, its connection to the Australian mining sector, and the strong brands under its umbrella, such as BMW, Caterpillar, Toyota, and Perodua. The bank maintains an "outperform" call on Sime Darby, while noting potential risks such as government cutbacks on infrastructure spending, a slowdown in the mining sector, reduced consumer spending amidst high inflation, and ongoing disruptions in the automotive supply chain.
Public Investment Bank Bhd, however, expressed uncertainty about the group's outlook, citing challenging conditions in China, including intensifying price wars. In Malaysia, demand for motor vehicles is expected to weaken due to anticipated fuel subsidy rationalization and the introduction of a high-value goods tax. Additionally, the increasing presence of Chinese original equipment manufacturers (OEMs) and competitive pricing may further intensify market competition, squeezing profit margins and limiting earnings growth. Despite these challenges, the strong performance of the industrial division in Australasia and Malaysia, along with UMW, is expected to offset weaknesses in China operations.
As of 10:51 am, Sime Darby shares fell by one sen to RM2.27, with 1.54 million shares traded.