Proton targets the world market
Proton unveiled its first concept car yesterday at the Geneva
International Motor Show. The hybrid vehicle comes in 3
variants, with an indicative price tag of
world markets because the domestic market is small. This
involves much larger capex of RM700m-RM800m p.a. (vs.
its current recurring R&D investment of c. RM400m-
RM500m p.a.) because Proton needs to comply with
regulations of foreign countries. Citing the Proton Saga as
an example, Proton needed to change 200 items in order to
export to the UK.
We would be reviewing our forecasts, which currently factor
in RM500m of capex, in light of the latest development.
While there is potential for raise our capex assumption, we
are also mindful that units sales would also need to be
revised upwards. Consequently, there may be room to raise
operating margin because of better economies of scale.
Recall that Proton’s plants are currently operating at c. 50%
utilization rate, and further take-up of its excess capacity is
catalyst for upgrade. This could include manufacturing for
global car makers. We maintain our forecasts with a price
target of RM4.60 (based on 0.5x CY10 NTA) and Buy call
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