Sime Darby To Leverage Its Strong Industrial Segment In 2025 - Analysts

KUALA LUMPUR, Feb 25 (Bernama) -- Sime Darby Bhd is set to capitalise on its strong industrial segment in 2025, driven by a robust order book and the full consolidation of UMW Holdings Bhd, analysts said.

Hong Leong Investment Bank Bhd (HLIB Research) expects Sime Darby’s earnings to hold steady in the second half of 2025 (2H 2025), supported by a record-high order book of RM4.8 billion as at December 2024.

"Australia accounts for 56.1 per cent of its order book, mainly from the mining sector,

"56.1 per cent of its order book is attributed to the Australian market, mainly the mining sector, due to profitable commodity prices.  

"Outstanding order book has increased for Malaysia, given more infrastructure projects and power and energy equipment for the rising development of data centres," HLIB Research said in a note.  

It said the sustainability of the UMW segment is expected to be anchored by Perodua’s associate performance, with Toyota and Perodua setting 2025 sales targets of 90,000 and 345,000 units, respectively.  

HLIB Research maintained a "buy" call on Sime Darby, with a target price (TP) of RM2.65.  

RHB Investment Bank Bhd (RHB IB), which also reiterated a "buy" recommendation with a TP of RM3.05, remains upbeat on Sime Darby’s industrial division, though ongoing price reductions in parts may weigh on its 2H 2025 performance.  

"The automotive segment could see volume normalisation in line with our cyclical downturn outlook for the sector, but this should be mitigated by a healthy contribution from UMW, with Perodua and Toyota in its offerings," it said.  

The investment bank rrevised its financial year 2025–FY2027 earnings forecast upwards by 6.0 per cent, 4.0 per cent, and 4.0 per cent, citing higher taxes and minority interest.  

Kenanga Investment Bank Bhd continues to favour Sime Darby for its market share in Malaysia, its proxy to the Australian mining sector, and the strong brands under its stable, such as BMW, Caterpillar, Toyota and Perodua.  

"As such, we maintain an 'outperform' call on Sime Darby, with potential risks including governments cutting back on infrastructure spending as part of an austerity drive, a slowdown in the mining sector hurting demand for heavy equipment, consumers reducing discretionary spending amidst high inflation, and persistent disruptions in the automotive supply chain," it said.  

Public Investment Bank Bhd, however, said the group’s outlook remains uncertain, with challenging conditions in China expected to persist, including intensifying price wars.  

It said that in Malaysia, demand for motor vehicles is expected to weaken due to the anticipated fuel subsidy rationalisation and the introduction of a high-value goods tax.

"Furthermore, the influx of Chinese original equipment manufacturers (OEMs) and competitive pricing may intensify market competition, further squeezing profit margins and limiting earnings growth.  

"Despite these headwinds, the robust performance of the industrial division in Australasia and Malaysia, as well as UMW, is expected to cushion the weakness in its China operations," it said.  

As at 10.51 am, Sime Darby fell one sen to RM2.27, with 1.54 million shares transacted.  

-- BERNAMA