Iriz a “game-changer” for Proton, say analysts

PETALING JAYA: The newly-launched Iriz is expected to be a "game-changer" for Proton and might even take away market share from the popular Perodua's Myvi.
PublicInvest Research said the Iriz will be a "game-changer" for Proton to achieve the economies of scale (production volume around 150,000 units annually) necessary for the auto-maker to return to profitability, which in turn bodes well for its parent DRB-Hicom Bhd.
Proton has been weighing down DRB's overall performance since it acquired Proton in 2012.
PublicInvest Research is maintaining an "outperform" rating on DRB-Hicom, with an unchanged target price of RM3.20.
"In our opinion, Proton Iriz will enable Proton to sell enough volume to achieve the necessary economies of scale to turn profitable, and thus removing a key source of earnings drag for the DRB group from 2015," it added.
RHB Research, meanwhile, said Iriz will likely be a strong contender in the B-segment, more than capable of taking market share away from an increasingly dated Myvi.
The research house opined that the Iriz could support an interim re-rating of DRB-Hicom's battered share price back to at least RM2.50 despite the ability to test new highs may take longer to achieve.
It has maintained a "buy" call on DRB-Hicom, with a fair value of RM3.20.
RHB Research stressed that Proton's challenges are far from over even if the Iriz proves to be a domestic sales success, but it does provide a financial base to reinvest in the development of other models.
It believes there is a strong chance that Iriz will achieve domestic success as Proton gradually overcomes entrenched long-term prejudices in the market, with the Iriz platform to eventually spawn a sedan version that could replace the Saga.
Even though the Iriz has received 17,000 bookings, RHB Research said it remains to be seen how many bookings actually translate into actual vehicle deliveries given the high 60% financing rejection rate for the purchase of cars in this category.