HLIND's 1QFY25 results beat our expectation. Its 1QFY25 core net profit rose 46% YoY driven by higher production volume for all-new motorcycle models, price hikes, and shift toward more premium products with strong margins. It introduced the all-new Yamaha PG-1 in August 2024 and looks to build a new Guocera tiles plant in 2026.

We raise our FY25F and FY26F net profit by 7% and 10%, respectively, lift our TP by 7% to RM15.50 (from RM14.50), and maintain our OUTPERFORM call.

HLIND's 1QFY25 core net profit (excluding one-offs at RM12.6m) beat our expectation at 32% of our full-year forecast. The variance against our forecast arose largely from higher-than-expected production volume, and margins. We have sole coverage on the stock.

YoY, its 1QFY25 revenue rose 11% driven by higher production volume of the new model Yamaha Y16ZR ABS (launched in Jan 2024), all-new Yamaha PG-1 (launched in August 2024) and consistent strong demand of the other models. There was also increase in sales for the automatic models such as NVX, and XMAX (250cc). Its plant utilisation levels at both Yamaha Motor and Guocera production plants grew higher at 80%- 85% (from 70%-80%). Meanwhile, its associate Yamaha Motor Vietnam (YMVN) saw a recovery with profit contribution of RM9.4m (>100%) from a lower base due to market share loss in previous years.

Its core net profit soared 46% on: (i) an average price hike of 5% since early-CY24, (ii) a shift in product mix away from mass-market models, i.e. 125cc and below, of which demand is slowing, towards more premium models such as 135LC, Y16ZR and Y15ZR, and (iii) higher margins realised from the new-generation PG-1, and Y16ZR ABS.

QoQ, its 1QFY25 revenue rose 20% driven by higher production volume of the all-new Yamaha PG-1 (launched in August 2024) and consistent strong demand for the other models. Its core net profit soared 30% on favourable sales mix toward premium models as well as lower tax rate of 21.8% vs 22.4% in 4QFY24 (as gain from disposal of land subjected to RPGT instead of corporate tax).

Outlook. It introduced the all-new Yamaha PG-1 (priced from RM6,998) in August 2024, which is expected to be a new volume-driven models (expected to produce at least 500 units per month, with production scaled- up thereafter based on demand). It also plans to build a new Guocera tiles plant with production expected to begin in 2026. Fully automated, the plant can produce bigger format size tiles which command a higher margin compared to the existing production line.

Forecasts. We raise our FY25F and FY26F net profit by 7% and 10%, respectively. We now project both Jul 2024 - Jun 2025 industry sales volume and Yamaha sales volume to increase by 11% YoY (vs. +7% previously). We increase industry sales volume to 680k units (from 650k units) and Yamaha sales volume to 345k units (from 335k units). We are slightly more positive for FY26. For the period from Jul 2025 to Jun 2026, we projected industry and Yamaha sales volumes of 700k units and 355k units, respectively.

Valuations. Correspondingly, we upgrade our TP by 7% to RM15.50 (from RM14.50), based on unchanged PER of 12x on FY25F EPS, at 1x multiple premium to passenger vehicle sector's average forward PER of 11x given its strong market position in the local motorcycle segment which prospects are buoyed by the booming gig economy.

The rest of the page is intentionally left blank There is no adjustment to our target price based on ESG given a 3-star rating as appraised by us (see Page 4).

Investment case. We continue to like HLIND: (i) as it is a strong proxy to the booming gig economy given the critical role of motorised two-wheelers in executing online delivery transactions, (ii) for its association with the strong Yamaha motorcycle brand in Malaysia and the brand's market leader position in the local motorcycle segment, and (iii) for its strong war chest with a net cash of RM1.9b which could be deployed for earnings-accretive acquisitions. Its dividend yield is attractive at 5%. Maintain OUTPERFORM.

Risks to our call include: (i) consumers cutting back on discretionary spending (particularly big-ticket items like new motorcycles) amidst high inflation, (ii) supply chain disruptions, (iii) escalating input costs, and (iv) a global recession hurting demand for the export of its motorcycles and tiles.

^ One-offs at RM12.6m for disposal of an old factory land

Source: Kenanga Research - 26 Nov 2024