• Maintain SELL (TP: 4.37). MBM’s 1HFY24 net profit of RM148mn (+12.1% YoY) was in-line with our and consensus expectations, accounting for 50% and 54% respectively. Revenue and net profit for 2QFY24 decreased 7.8% and 15.7% QoQ, respectively mainly due to lower vehicle supply affecting the Motor Trading and Auto Parts Manufacturing Divisions. In 1HFY24, the company declared a first interim and a special dividend of 6sen and 10sen respectively bringing 1HFY24 DPS to 16sen (1HFY23:26sen). We maintain a SELL call for MBM’s with new TP to RM4.37 (from RM4.28) as we roll forward our valuation base year to FY25F. Our valuation is now pegged at 6.6x PER (based on +0.5SD of 5-year mean PER) to FY25F EPS of 66.2sen.

• Key Highlight. Revenue increased by (+5.5% YoY), driven by higher contribution from key divisions, specifically from i) Motor Trading (+6.9% YoY), and ii) Other segment (+3.55 YoY), which offset the decline in Auto Parts Manufacturing (-3.8% YoY) due to changes in the customer and model mix. This led to stronger PATAMI, which rose by (30.3% YoY), supported by increase in share of profit from associate (+27% YoY). However, on a QoQ basis, there was a decline in revenue and net profit by 7.8% and 15.7%, respectively, due to lower vehicle sales across all brands in June 2024 driven by scheduled plant shutdowns by major OEMs in both April and June 2024, coinciding with public holidays during both months.

• Earnings revision. No changes to our earnings forecast.

• Outlook. We maintain a cautious outlook for 2HFY24, anticipating a decline in volume as demand normalizes to pre-pandemic levels. This is further compounded by softening consumer sentiment towards highvalue purchases, primarily driven by the 8% SST increase and the expected introduction of the RON95 subsidy. Despite these headwinds, there is potential upside to our forecast with the launch of the new premium SUV brand 'Jaecoo' through MBM's subsidiary. Additionally, the expected salary increment for civil servants presents a positive catalyst, though we anticipate the financial impact to materialize only in early 2025, given the increment is scheduled for December 2024.

Source: BIMB Securities Research - 30 Aug 2024