We maintain BUY call on Bermaz Auto (BAuto) with a higher fair value (FV) of RM3.10/share from RM2.77/share previously. This is derived from an unchanged FY24F target P/E of 12x, on par with its 5-year mean. We maintain a neutral ESG rating of 3-star.
Our FY24F-FY25F earnings have been raised by 12%/4% to account for higher sales volume assumptions and associate contribution together with some fine-tuning to FY26F. We raise FY24F sales volume assumption by 13% to 23.6k units from 20.9kunits while increasing FY25F sales volume assumption by 5% to 22.9k units from 21.7k.
BAuto’s 1QFY24 net profit of RM100.2mil (-0.4% QoQ, +99.8% YoY) was above our expectations, accounting for 36% of our FY24F earnings and 38% of consensus. The positive deviation was due to higher-than-expected sales volume. As a comparison, 1QFY23 accounted for only 16.5% of FY23 core net profit.
YoY, the group’s 1QFY24 revenue surged 52% to RM1.1bil mainly due to strong Mazda sales, particularly the CX-30 CKD model which was introduced in March 2023, and continued fulfilment of balance back orders for Mazda 3.
The impressive revenue delivery stemmed from vehicle sales rising 53% YoY to 6,357 units, thanks to Mazda Malaysia’s robust performance while net profit was further boosted by associate contribution surging 2.2x YoY. Domestically, Mazda sold 4,999 units (+68% YoY), Kia 315 units (+19% YoY) and Peugeot 313 units (-34% YoY).
On the regional front, Philippines operations reported a remarkable revenue growth of 70% YoY, lifted by a similar 73% increase in car sales to 730 units.
BAuto declared a 1QFY24 dividend of 5 sen per share, up 2 sen YoY, which translates to a payout ratio of 58%. This accounts for 36% of our FY23F DPS of 14.0 sen, based on a payout ratio of 52%.
We continue to like BAuto for its robust earnings visibility, supported by a substantial order backlog of 4.5k units comprising 4K Mazda units, 500 units for Kia and Peugeot. This is sufficient to support its sales at least for the next 6–7 months.
In addition, prospective growth is underpinned by a robust pipeline of new launches and increasing CKD mix. The upcoming launches which could serve as catalysts are the: i) Mazda CX-60 CBU, ii) CKD Kia Sportage and Carens; and iii) Peugeot new 408.
The group currently trades at a compelling FY24F PE of 8x versus its 5-year average of 12x with an attractive FY24F dividend yield of 6%.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....