Bermaz Auto (BAuto) reported net profit of RM10.3m in 1QFY22 (+11.1% YoY, -84.6% QoQ). The results were below both our and consensus expectations, accounting for 7.8% and 7.3% of full year estimates respectively. The Group’s business was impacted by full lockdown under Phase 1 of the National Recovery Plan (NRP) where the auto industry has been effectively shut down for two months since 1 Jun. Nevertheless, we expect better performance in coming quarters following a gradual reopening of economic sectors as the country transitions through the various phases of the NRP. As such, we leave our estimates unchanged. We remain positive of its growth prospects going into FY23 driven by the introduction of new models under Kia and Peugeot marques. We retain our Outperform call with unchanged TP of RM1.78. During the quarter, BAuto declared a first interim dividend of 0.50sen, translating to a payout ratio of 56.3% (1QFY20: 0.50sen at 63% payout ratio).

• Revenue for 1QFY22 fell drastically to RM320.8m (-28.5% YoY, -50.0% QoQ) largely due to minimal sales registered from the domestic operations during the lockdown period under Phase 1 of the NRP where all showrooms and motor vehicle production plants and distribution were not allowed to operate for 2 months since 1st of June. Additionally, previous quarter sales volume was exceptionally high as consumers were rushing to buy new vehicles in new calendar year 2021 and boosted by the expiry of the SST Exemption in June 2021. The government had subsequently extended the SST Exemption to 31 Dec 2021.

• Net Profit for 1QFY22 fell significantly (+11.1% YoY, -84.6% QoQ) to RM10.3m attributed to lower sales as explained above and share of loss of RM2.1m from its associated company, Mazda Malaysia Sdn Bhd (MMSB), whereas in previous quarter, it was a share of profit of RM12.7m. Share of loss from MMSB was in line with the significant drop in unit sales to 1,429 units (4Q21: 3,893 units).

• Outlook. Based on MAA statistics, total industry volume (TIV) amounted to only 1,921 units and 7,086 units for June and July 2021 respectively, compared to average sales between 45k to 50k units per month. The sharp plunge in vehicle sales following the MCO had impacted the Group’s business operations. Nevertheless, we expect vehicle sales to recover strongly in the months ahead following the easing of restrictions as the country progresses toward the latter stages of the NRP, supported by pent-up demand and the current SST exemption till this year end.

Source: PublicInvest Research - 14 Sept 2021