"With a significant market share across its key markets, the building materials segment faces a robust pipeline of mega infrastructure and HDB projects. The diesel engine segment also faces strong volume growth across new markets," the analysts state.
"In our view, HLA remains undervalued given the positive outlook for its businesses," they add.
Within Singapore, the company's cement business is set to enjoy stronger demand from an overview boom in the construction industry thanks to several big projects the likes of the airport's Terminal 5, the Tuas port, plus other MRT lines and so on.
In a similar picture in Malaysia, there are key infrastructure projects such as the Mass Rapid Transit Phase 3, Pan Borneo Sabah Phase 1, High Speed Rail and the Sabah-Sarawak Link Road.
See also: PhillipCapital initiates coverage on CNMC Goldmine with 'buy' call and 49 cents target price
"With significant market share and a strong pipeline of both public and private sector projects, HLA’s building materials unit segment serves as a strong proxy for the construction sector, in our view," state Tan and Mo.
HLA's separately listed subsidiary China Yuchai International, as a leading diesel engine maker in China, is actively investing to upgrade its product portfolio to be more green.
"Some new energy solutions include electric-continuously variable transmission power-split hybrid powertrain, integrated electric drive axle powertrain and hydrogen fuel cell systems," the analysts note.
See also: Morningstar ‘unsurprised’ by Nio new share offering, sees 35% growth forecast in FY2025
They estimate that HLA can grow its earnings by 23% this current FY2025 to reach $79.4 million and a further 11.9% in the following FY2026 to $88.8 million and $102.4 million in FY2027.
Using a sum-of-the-parts valuation, which includes a higher value of its separately-listed associate BRC Asia , Tan and Mo have derived a target price of $1.46.
"With HLA’s current market cap at around $763 million, we still think that HLA remains undervalued, specifically its BMU segment which is currently being neglected by the market," say Tan and Mo.
HLA shares, as at 9.52 am, was up 2.94% to change hands at $1.05.
