Bermaz Auto (BAuto) recorded a net profit of RM33.1m (+21.8% YoY) in 3QFY21 mainly due to higher sales volume from domestic operations, driven by the positive impact from the stimulus package introduced by the government which provides sales tax exemption on both CKD and CBU vehicles. Sales volume for Malaysia jumped by 60% YoY. However, this improvement was partially offset by lower sales volume from the Philippine operations. For 9MFY21, the results were in line with our full-year forecast but slightly below market expectations. We make no changes to our earnings forecasts and maintain our Neutral call on BAuto. A third interim dividend of 1.5sen per share was approved, bringing total dividend declared for FY21F to 3.25sen per share.

• Higher domestic sales volume. Revenue for 3QFY21 increased by 27.9% YoY to RM598m, from RM467.5m in 3QFY20 due to higher sales volume from the domestic operations. Despite the impact of the Covid- 19 pandemic, improvement in sales volume for the domestic operations was mainly driven by the vehicle sales tax exemption in place and aggressive promotional campaign offering free 6 years of warranty and 6 years of free maintenance. Both CBU and CKD volumes were higher, +39% YoY and +67% YoY respectively. Nevertheless, this was partly offset by lower sales volume in the Philippines (-48%), which was negatively impacted by the Covid-19 pandemic.

• 3QFY21 earnings rose 21.8% YoY. BAuto reported higher EBIT of RM35.6m (+32% YoY) in 3QFY21, in-line with higher sales volume from the domestic operations. However, this was partly offset by weaker contribution from the Philippines operations, which barely broke-even compared to a profit of RM4.4m in 3QFY20. Meanwhile, profit contribution from its associated companies was down 13.6% YoY, mainly due to the drop in unit sales for Mazda Malaysia (-21%) as a result of softer export markets following the imposition of lockdown measures and weaker economic sentiment in the region. Note that the sole distributorship of the Peugeot marque has started contributing to the group, though it remains immaterial during the quarter.

• Outlook. We understand that BAuto has been given the green light from Mazda Japan to do the third CKD programme of CX-30 model in the Kulim assembly plant at the earliest in December 2021. Given this, we expect margins to improve in the medium term. Meanwhile, its Philippines’ operations are expected to continue to be impacted by lower sales volume arising from a weaker market due to the impact of the Covid-19 pandemic. Nevertheless, we understand that this will be mitigated by its minimal operating overhead.

Source: PublicInvest Research - 11 Mar 2021