Bermaz Auto Bhd (BAuto) reported another sequentially weaker 3QFY24 net profit of RM70.5m (-19.2% YoY, -21.7% QoQ), mainly attributed to lower sales volume and change in sales mix from its domestic Mazda marque. Cumulative 9MFY24 net profit of RM260.8m (+28.4% YoY) beat both our and consensus expectations however, accounting for 86.7% and 77.4% of full-year estimates respectively. The discrepancy in our numbers was mainly due to better contribution from the Philippines operation. We adjust our FY24-26 forecast marginally higher by 2% to account for better performance in its Philippines’ operation. Consequently, our TP is revised slightly higher to RM2.72 (previously RM2.67). We retain our Neutral call however given limited upside to our revised TP. A third interim dividend of 4.25 sen per share was declared for the quarter, translating to a payout ratio of 70.3% (3QFY23: 4.5 sen at 60.1% payout ratio).

Revenue for 3QFY24 was weaker at RM896.5m (-8.1% YoY, -11.0% QoQ) on lower sales volume, at 5,463 units (-5.7% YoY, -11.7% QoQ). During the quarter, total vehicle sales in Malaysia’s operation decreased to 4,857 units (-10.8% YoY, -12.9% QoQ), mainly due to weaker sales of Mazda and Kia CBU models. This was partly offset by stronger vehicle sales in its Philippines’ operation at 606 units (+73.1% YoY, -0.7% QoQ).

Net profit for 3QFY24 was weaker at RM70.5m (-19.2% YoY, -21.7% QoQ) in line with the lower sales volume and change in sales mix from its domestic Mazda marque. This was partly lifted by better contribution from its Philippines’ operation (+97.3% YoY, -17.6% QoQ) and associated company Inokom.

New launches ahead. BAuto plans to bring the Mazda CX-60 (CBU) and Kia all-new Sportage (CBU) to Malaysia, tentatively in the second half of year 2024 (1HFY25).

Subdued outlook. While Malaysia’s total industry volume (TIV) recorded outstanding performance in 2023 with an all-time high of 799,731 units (+11% YoY), TIV is expected to decrease by 7.5% YoY to 740,000 units in 2024. Forward car sales orders are showing signs of easing along with shorter waiting period. Jan’24 TIV was 16% lower than Dec’23. A number of factors including elevated living costs, softer demand for discretionary items due to concerns over targeted subsidy rationalization and lack of catalyst for the auto sector may restrict growth in sales volume. In addition, stiff competition from the influx of new model launches and competitive pricing in the market may pressure sector margins and curb earnings growth despite backlog orders remaining relatively robust.

Source: PublicInvest Research - 4 Oct 2024