Investment Highlights

• We maintain BUY on Bermaz Auto with a higher fair value (FV) of RM3.42/share from RM3.29/share previously. This is premised on FY24F PE of 12x, on par with its 5-year mean. We kept a neutral ESG rating of 3-star.

• BAuto’s 6MFY24 core net profit was slightly above expectations which accounted for 59% of our FY24F earnings and 62% of consensus. The strong performance was driven by higher-than-expected Mazda sales volume, mainly from the CX-30 CKD model and backlog order fulfillment for Mazda 3 during the preceding quarter.

• We revised our FY24F-FY25F earnings upwards by 4%/5% to take into consideration higher associate contribution and slightly increased sales volume assumption. We raised our FY24F sales volume assumption by 3% to 24.7k units from 23.9k units previously. Meanwhile, our FY25F sales volume assumption also increased by 2% to 24k units from 23.4k units previously. We also did some finetuning to FY26F, backed by stronger revenue growth of 9%.

• 6MFY24 earnings increased 64.3% YoY to RM190mil. The higher earnings were supported by a 73% YoY growth in associate profits, mainly fueled by stronger performance from its 30%-owned Mazda Malaysia (26.8% YoY) and 29%-owned Inokom Malaysia (2x YoY).

• For the domestic market in 6MFY24, Mazda sold 7k units (+11.6% YoY) while Kia delivered 364 units (+14.1%YoY). Meanwhile on the regional front, the Philippines operations reported income growth of 2.2x YoY, lifted by a 55.4% YoY increase in Mazda car sales to 1.3k units.

• On a quarterly basis, revenue dropped by 7.6% QoQ to RM1bil in 2QFY24, largely dragged by a drop in revenue in Malaysia (-6.6% QoQ) and Philippines (-11.4% QoQ). Meanwhile, bottomline decreased 10% QoQ to RM90bil due to by weaker growth in sales volume for Kia models (-84.4% QoQ) and Mazda CBU models (-43.4% QoQ).

• The group declared a second interim dividend of 5 sen/share for the quarter under review, bringing 6MFY24 dividend to 10 sen/share. This accounts for 63% of our FY24F DPS of 16 sen, based on a payout ratio of 71.4%.

• Based on our channel check Mazda currently has a backlog order of 2.5k units as of December 2023 and targets to achieve an average 18k units of backlog orders in FY24F-FY25F. We continue to like BAuto for its attractive model rollouts and CKD model expansions.

• The facelifted CX-5 model, Mazda’s volume driver, is expected to be launched by early next year, which we foresee will contribute to an upward booking trend and higher order backlogs that will support the momentum of motor vehicle sales.

• The group currently trades at a compelling FY24F PE of 8x versus its 10-year average of 12x with an attractive FY24F dividend yield of 6%.

Source: AmInvest Research - 13 Dec 2023