Fewer white-goods sold. Xinfei, the consumer products group, recorded a revenue decline of 15% YoY to S$256m. 755k units of refrigerators and freezers were sold in 1Q09, 15% lower YoY. Xinfei tightened its credit to hypermarket chains and this led to some loss of business. In addition, ASP fell 6% YoY to RMB1,451.
More light-duty diesel engines sold, but heavy duty unit sales fell. The industrial products segment (incorporating diesel engines), recorded revenue expansion of 5% YoY to S$665m. 122k units of diesel engines were sold in 1Q09, down 5% YoY ? due to a 48% fall in heavy duty engine sales to 4.7k units. But this was offset by a 10% increase in light duty engine sales to 62.3k units. As heavy duty engines command higher margin (versus light duty engines), overall gross margin narrowed.
The building materials group (BMG) recorded revenue growth of 64% YoY to S$146m, primarily due to the consolidation of Tasek. Granite sales rose 35% YoY to 581k MT and cement was up 17% YoY to 616k MT.
Factoring in better 1Q09 net profit and expectations of strong sales, particularly for the white-goods business and continued robustness for the BMG, we have raised our 2009 net profit forecast by 74% to S$79m.
We maintain BUY and upgrade HLA target price from S$0.73 to S$1.20, based on sum-of-the parts valuation.
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