Aseambankers' Vincent Khoo, which has a "hold" call, said he expects its earnings to soften in the final quarter, dragged down by lower sales and rising component costs.
Tan Chong's best-selling model, the Grand Livina MPV, which accounts for 40 per cent of its sales, is also expected to face competition from rival Proton's new MPV model, scheduled for launch in the first quarter of next year.
Khoo said he expects the company's sales to fall by up to 15 per cent next year as it absorbs full impact of the yen's appreciation against the ringgit, and also because of higher advertising and promotional expenditure.
"With no catalyst in sight, we reduce our target price to RM1.05," he said, adding however that the company offers decent dividend yields of 7.4 per cent.
Its share price rose by as much as four sen to RM1.19 in morning trade yesterday, before closing one sen lower than the previous day to RM1.14.
Tan Chong's third quarter results had almost tripled to RM95.4 million, beating market expectations.
At least two analysts kept a neutral stance on the stock, while another maintained a "sell" call. Four others stuck to their "buy" recommended.
CIMB Research has an "outperform" call on the stock but lowered its target price to RM2.60 from RM3.25, after cutting its 2009 and 2010 earnings forecast for the company by between 20 per cent and 23 per cent.
The earnings downgrade reflected CIMB's assumption of a further strengthening of the yen, it said in a report yesterday.
CIMB expects to see a four per cent drop in Nissan sales next year, given the current stock market volatility, weak consumer sentiment and lower disposable incomes.
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