Automation to drive Seng Fong’s expansion

PETALING JAYA: Rubber processor and exporter Seng Fong Holdings Bhd’s earnings estimates have been tweaked downwards by up to 8% for the next three financial years due to its recent earnings falling short of expectations.

Hong Leong Investment Bank (HLIB) Research said in a report that due to the earnings miss, it is lowering its earnings estimates for financial year 2025 (FY25)/FY26/FY27 by 8%, 8%, and 7%, respectively.

“Post earnings adjustments, Seng Fong ’s fair value is revised to RM1.39 a share (from RM1.51), based on 15 times 2025 price to earnings.

“Seng Fong stands out as a unique proxy for the China and India automotive markets on Bursa Malaysia, where total industry volumes there are multiple times higher versus domestically.”

In addition, the company is well-positioned to benefit from the ongoing global electric vehicle adoption, it said.

HLIB Research noted that Seng Fong ’s management continues to guide for strong rubber block demand over the next 12 months.

Robust automotive sales in China and aggressive expansion plans announced by Indian tyre manufacturers have driven strong orders from these key markets, it said.

It noted that Seng Fong is targeting sales volume of 180,000 tonnes for FY25 (plus 11% year-on-year), with India contributing mostly to this growth.

With this, Seng Fong guided a sales mix of 60% from China, 35% from India, and 5% from other markets, shifting from the previous 70/25/5 ratio, said the research house.

“A higher sales share from India could lead to margin expansion, given the better pricing in that market,” HLIB Research added.