MCE Holdings eyes expansion phase amid contract wins
Hong Leong Investment Bank (HLIB) Research has initiated coverage with a 'buy' rating and a target price of RM2.40, implying a 66.7% capital upside.
It sees MCE as 'a resilient, scalable proxy to Malaysia's transition towards high-value auto electronics and the global 'China + N' supply chain realignment'.
At the heart of MCE's growth outlook is its breakthrough entry into the electric vehicle (EV) supply chain for Perusahaan Otomobil Kedua Sdn Bhd (Perodua).
HLIB Research reported that the company secured contracts to supply high-value infotainment and advanced driver assistance systems (ADAS), raising potential revenue per vehicle to approximately RM3,000, which is 10 times its traditional content value.
The research unit estimated annual revenue from this programme to reach RM39.8mil to RM59.7mil, or up to 38% of turnover for the financial year ended July 2024 (FY24), if Perodua meets its targeted sales volumes.
MCE is also accelerating its international presence, with significant wins in the US market.
Contracts with Nasdaq-listed Dorman Products and Michigan-based JVIS USA will add a combined RM30.3mil in annual revenue at full ramp-up.
HLIB Research noted that these contracts were secured via competitive global tenders, underscoring MCE's 'technical credibility and global competitiveness'.
Beyond automotive, the group is also moving into new verticals.
A joint venture with Hong Kong's Sounding Industries will produce non-automotive products with minimal capital expenditure, while a partnership with China's Nanjing Chuhang Technology will position MCE in the fast-growing mmWave radar segment for ADAS.
In addition, HLIB Research reported that financially, MCE has turned around its pre-FY22 losses, supported by Proton Holdings Bhd's sales recovery and deeper supply ties with Perodua.
Core earnings are forecast to grow at a 15.8% compounded annual growth rate between FY25 and FY27, reaching RM27mil by FY27, with full-year contributions from EV, export and non-automotive contracts.
The group's balance sheet remains strong, with net cash of RM83.6mil, or about 42% of market capitalisation.
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