Sime Darby Bhd has received positive analyst attention, with RHB Investment Bank Bhd (RHB Research) maintaining a BUY call and raising its target price (TP) to RM3.15, representing a 37% upside. Maybank Investment Bank Bhd (Maybank IB) also kept a BUY call, although it has revised its TP downward to RM2.64, reflecting headwinds in China.

Sime's 1QFY25 earnings aligned with expectations, showing an 11% year-on-year increase in core earnings to RM359 million. This growth was primarily attributed to the consolidation of UMW's operations, following its acquisition in the second quarter of FY24.

RHB Research noted that the motor segment saw a 6% decline in profit before interest and tax (PBIT), primarily due to a 13% drop in Malaysian operations. However, China operations turned profitable this quarter, reporting a PBIT of RM6 million, a significant recovery from a loss of RM105 million in 4QFY24. Despite margin declines due to aggressive price competition in China, the group's future prospects remain strong, especially as the market recovers.

The industrial segment's PBIT fell 9%, mainly due to reduced equipment part prices and currency translation losses, but Australasia's operations showed resilience. Sime Darby's order book for Australasia grew to RM2.84 billion in October, up from RM2.76 billion in June. The strong contribution of UMW, which added RM302 million to the bottom line, made up 30% of Sime Darby's core PBIT, further enhancing the company's position in the local automotive market. Malaysia now represents 36% of Sime Darby's 1QFY25 revenue, a significant increase from 18% before the UMW acquisition.

In Maybank IB's view, the industrial division is expected to benefit from robust commodity demand, while the motor segment should see a lift from anticipated electric vehicle (EV) sales, particularly before Malaysia's EV tax holiday ends in 2025. Despite these positives, Maybank IB cautioned about challenges in China, where weaker economic conditions have impacted margins and sales. The motor segment's performance in other regions also decreased, with total vehicle sales falling by 6% year-on-year. However, Singapore's market showed strength, particularly in EV sales.

Looking ahead, both analysts expect Sime's diversified business model and strong order book to support continued growth, though risks remain from weaker-than-expected margins, softer car sales, and a prolonged downturn in China's market.