MCE Holdings poised for stronger FY27 growth on new models, US exports

KUALA LUMPUR: Automotive parts maker MCE Holdings Bhd is poised for stronger growth in financial year 2027 (FY27), driven by newly launched vehicle models, its US export business and a growing portfolio of higher-value automotive electronics.

Hong Leong Investment Bank Bhd (HLIB) said MCE's new Johor Bahru factory would also allow the group to bring certain outsourced plastic injection processes in-house, helping to lower costs and improve margins.

"We expect QV-E component production to ramp up gradually, supported by recent promotional pricing that improves the model's competitiveness against Proton's electric vehicle (EV) offering.

"MCE is also expected to begin deliveries to US customer JVIS from the end of the second quarter (Q2) of FY27," it said in a note.

In August, MCE secured a contract to supply audio display units, reverse cameras and advanced driver assistance system-related products for a Perodua internal combustion engine (ICE) model, with production expected to begin in the fourth quarter of FY27.

HLIB said the contract marked a breakthrough for MCE into more sophisticated, higher-value electronics within the ICE segment.

"Compared with EV models, whose sales remain at an early stage of ramp-up, the ICE model should provide a larger and more stable production-volume base.

"Combined with significantly higher content value than MCE's traditional components, the contract is expected to deliver a meaningful revenue uplift starting from Q4 FY27," it added.

HLIB said MCE's results came in below expectations, achieving 90.9 per cent of its full-year forecast, mainly due to higher-than-anticipated raw material costs.

While some cost pressures are expected to ease in the coming quarters, the firm expects elevated resin and mineral prices to continue weighing on MCE's margins in the near term, particularly amid ongoing geopolitical tensions.

"We lower our FY27 and FY28 forecasts by 4.3 per cent and 1.3 per cent to factor in higher raw material costs," HLIB said.

HLIB maintained its "Buy" call on MCE but lowered its target price to RM2.31 from RM2.42.