They have raised their earnings estimates for FY2026 and FY2027 by 3% and 11%, respectively, and, by tweaking their valuation methodology, arrived at a higher target price of $5.50 from $4.50 previously.
HLA’s powertrain segment is expected to remain its key earnings driver over FY2026–FY2028, driven by a better sales mix and robust demand for high-horsepower (HHP) engines used in data centres and marine applications. The segment’s profit is forecast to grow 47% y-o-y in FY2026.
The analysts estimate HHP engine sales could contribute 15% – 19% of HLA’s patmi in FY2026–FY2028. Underpinning demand is rising AI capex from Chinese hyperscalers, estimated to grow from US$60 billion ($76.2 billion) in 2025 to US$80 billion in FY2026, representing a 33% y-o-y increase.
Beyond HHP engines, China’s total diesel vehicle sales grew 16% y-o-y in 1QFY2026, with export growth outpacing domestic sales at 72% y-o-y, as Chinese original equipment manufacturers gain traction across Asean, the Middle East and Latin America.
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On the building materials front, HLA completed its acquisition of YTL on April 21 for $90.7 million, implying an FY2025 P/E of approximately four times, based on analysts’ estimates.
YTL is one of only five HDB-approved household shelter steelwork suppliers in Singapore, which analysts say creates high barriers to entry and provides two to three years of order-book visibility from Singapore’s HDB build-to-order pipeline of approximately 55,000 units across FY2025–FY2027.
Products built and sold by YTL include blast doors, part of the so-called household shelters required in HDB flats. The company manufactures other seemingly inconspicuous yet essential fittings, such as letterboxes, internal racks and bicycle racks.
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Founded in the 1950s, YTL has grown its business in tandem with Singapore’s public housing story. The company has been a supplier of various fittings to HDB projects since the 1960s. In recent years, as indicated on its website, YTL has won business supplying to high-profile developments such as Reflections at Keppel Bay, The Interlace and D’Leedon.
The analysts note that HLA’s acquisition of YTL is “immediately accretive” to FY2026/FY2027 EPS at 4%/8%, with YTL expected to contribute $13 million and $28 million to HLA’s patmi in FY2026 and FY2027, respectively.
In FY2026, the analysts project HLA’s patmi to increase to $156 million from $113 million in FY2025, and to $206 million in FY2027. The revised sum-of-the-parts target price values HLA’s building materials segment at eight times FY2027 EV/Ebitda.
Re-rating catalysts include the successful spin-offs of Guangxi Yuchai Marine and Genset Power Co (MGP) on the Hong Kong Stock Exchange, as well as a dividend step-up. On the other hand, downside risks include a slower recovery in China and delayed project execution.
Separately, Dale Lai of DBS Group Research has also turned more bullish on the company. In his May 12 note, he maintained his “buy” call and has revised his target price from $3.90 to $4.28.
Lai calls the acquisition of YTL “a niche but strategically relevant growth platform” for HLA’s Singapore-based building materials businesses. “In our view, the acquisition is aligned with HLA’s strategy to broaden its built-environment capabilities and deepen its exposure to Singapore’s residential construction ecosystem,” he adds.
That aside, in the foreseeable future, the main growth driver for HLA will be its China-based powertrain solutions unit, which Lai says has been reporting “strong growth” in recent years, gaining market share as earlier R&D efforts are paying off with better products.
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“The potential spin-off of its marine and generator subsidiary will be another value unlocking initiative that will power the next phase of growth as the unit targets rapid global expansion,” adds Lai.
His target price of $4.28 is based on a sum-of-the-parts valuation methodology that includes, first, 18 times P/E applied to HLA’s effective stake in China Yuchai International Holdings; next, 15 times P/E applied to its building materials division. Thirdly, HLA’s 20.2% stake in separately listed steel supplier BRC Asia, and last but not least, the strong cash position.
Driven by the various parts across its portfolio, Lai expects HLA to grow its earnings at a CAGR of 24% between FY2025 and FY2028 to a new record. Along with a better bottom line, higher dividends can be expected.
