• Maintain HOLD (TP: 5.50). MBM’s 9MFY24 core net profit of RM235mn (+13.6% YoY) was in line with our estimate but ahead of consensus expectations, accounting for 77% and 81% respectively. 3Q24 net profit grew by 29% QoQ to RM87.4mn mainly due to higher vehicle supply for the Motor Trading and Auto Parts Manufacturing Divisions. In 9MFY24, the company declared a second interim and a special dividend of 7.0 sen and 22.0 sen respectively bringing 9MFY24 DPS to 45.0 sen which was higher than the 9MFY23 DPS of 39.0 sen. With a high dividend yield of c.6%, we maintain our HOLD call on MBM with TP RM5.50; pegged at 6.4x PER (based on +1.0SD above the 5-year mean PER) to FY25F EPS of 86sen.

• Key Highlight. 3Q24 revenue was slightly higher by 2.8% YoY to RM638mn due to improved sales and production volumes, supported by an increased supply of vehicles, particularly from Perodua's suppliers. However, headline profit declined 16.6% YoY to RM87.4mn mainly due to a one-off gain from land sales recorded in 3Q23 amounted to RM29.3mn. Excluding this, core profit still rose by 15.8% mainly due to higher income from JV and associate companies as well as a lower effective tax rate. On QoQ basis, revenue and net profit rose by 12% and 29%, respectively, driven by higher vehicle sales across all brands, attributed to longer working days.

• Earnings revision. No changes to our earnings forecast.

• Outlook. We anticipate sustained demand for Perodua in 4Q24, driven by a longer working period, enhanced year-end campaigns, and attractive discounts, which are expected to support higher earnings for the quarter. However, we remain cautious due to several macroeconomic challenges. These include the potential implementation of a higher Goods Value Tax, which may increase the overall cost of vehicle ownership, as well as targeted subsidy rationalization and rising living costs, which could negatively impact consumer purchasing power and sentiment.

Source: BIMB Securities Research - 26 Nov 2024