Hong Leong Asia’s earnings to grow 52% this year

The building materials segment sets the foundation for the firm’s recovery.

Hong Leong Asia (HLA) is expected to see a 52% earnings growth in 2021 on the back of its building materials and diesel engine segments.

“HLA’s building materials unit is one of the largest integrated players in Singapore, providing ready-mix concrete and precast concrete elements for public housing construction,” UOB Kay Hian said, adding that it has the fourth largest Malaysian cement producer, Tasek, as its subsidiary.

The brokerage firm expects earnings in the building materials segment to shoot by 55% for 2021, driven by better sales volume and higher prices of precast and ready-mix concrete as construction activities resume.

Growth in HLA’s diesel engine segment, UOB Kay Hian noted, will be driven by China Yuchai International, a 44.7% owned subsidiary of the company. It manufactures and sells engines for trucks, passenger vehicles, industrial equipment, and agricultural equipment.

“Despite major disruptions due to COVID-19, China Yuchai recorded a 14.4% year-on-year (YoY) increase in the number of engine units, as a result of the growth in China’s agriculture segment. We expect the earnings of China Yuchai to grow by 17% YoY for 2021, as the growth momentum should continue in 2021 from greater buying activity in National VI(a) compliant diesel engines before its full implementation on 1 July 2021,” UOB Kay Hian said.

New energy solutions could also drive long-term growth for the company, following the partnership China Yuchai’s forged with Guangxi Shenlong Automobile Manufacturing to develop electronic vehicles on 2 June 2021.

On the back of these developments, HLA has disposed of its loss-making air-conditioning business in the first half of 2021.

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