Review

• Bermaz Auto Bhd (BAuto)’s 3QFY24 results came in within expectations. The core net profit decreased 19.4% YoY to RM70.4mn on the back of 8.1% drop in revenue. The weaker results were mainly attributable to lower sales volume, unfavourable sales mix as well as lower contribution from its associates.

• Cumulatively, 9MFY24 core net profit surged 27.8% YoY to RM259.6mn. Revenue increased 20.9% YoY to RM3.0bn, spurred by higher sales volume from the domestic operations, especially the Mazda CX-30 CKD model, which has continued to register stellar sales since launch in March 2023.

• 9MFY24 sales volume increased by 23.2% YoY to 18,295 units (Malaysia: 16,349 units, Philippines: 1,946 units). Note that the total combined sales volume of CX-30 and CX5 CKD constitute about 67% of total domestic sales volume.

• The board declared a third interim dividend of 4.25 sen (vs. 3QFY23: 4.50 sen) for the quarter under review. This will bring the YTD DPS to 14.25 sen (vs. 9MFY23: 11.0 sen)

Impact

• No change to our earnings forecasts.

Outlook

• We gathered that BAuto’s current backlog orders have softened to around 2.0k units from 2.5k units in Dec 2023.

• Meanwhile, BAuto has fully ceased its business operations as Peugeot’s sole distributor effective 29 Feb 2024. According to management, there will be no impairment on the book with the contract termination. Note that PEUGEOT only contributed to about 4% of the group’s total sales volume in 1HFY24.

• We expect automotive players to be more aggressive in pricing strategies in both their existing and new products to defend their market share amid intensifying competition.

Valuation

• Maintain SELL on BAuto with an unchanged TP of RM2.33, pegged on a 5-year rolling average PER of 10x.

Source: TA Research - 14 Mar 2024