CIMB Equities Research has said that it is downgrading the shares of conglomerate DRB-Hicom Bhd to `Trading Buy' from `Outperform' mainly due to weaker than expected earnings.

The company's earnings were under pressure due to the weak performance of its automotive division. Experts say that the automotive unit of the diverse conglomerate has shown weak performance since the takeover of Proton. The company faced aggressive pricing competition later in 2012 as the auto industry was clearing inventory, according to the research firm.

"With the nine-month core earnings per share for the period ended Dec 31, 2012 at only 27% of its full-year forecast and 20% of consensus, DRB's Q3FY13 was significantly below expectations. We cut our EPS forecasts by 9%-27% to reflect this event and cut our recommendation to Trading Buy," it said.

Analysts at the research firm said that reasons including aggressive industry discounting and promotional activity in the December quarter of 2012 affected the company's results for the third quarter of the current financial year due to low pricing power at Proton. DRB's auto business recorded a loss of RM 26 million during the third quarter of the financial year.

The results also showed that DRB's recorded a 80 per cent increase during the third quarter due to the sale of its power unit, Hicom Power Sdn Bhd. The group recorded a net profit of RM391.5 million during the third quarter compared to RM79.6 million during the same quarter of the previous year.