Bermaz Auto Bhd (BAuto) 1QFY24 net profit doubled YoY to RM100.2m, mainly attributed to the increase in overall sales volume and higher contribution from its Mazda marque, particularly the CX-30 CKD model and continued fulfillment of the balance backorders for Mazda 3. The results beat both our and consensus expectation, accounting for 46.8% and 38.3% of full-year estimates respectively. The discrepancy in our numbers was mainly due to balance backorders for Mazda 3. While new bookings and TIV continue to expand, we remain cautious and expect some normalisation in the near future considering the expiry of the SST holiday, uncertainties surrounding global economies amid the rising interest rate environment. Additionally, the weakening Ringgit against major currencies should also dampen consumer confidence. As such, we retain our FY24-26F earnings forecast. We maintain our Neutral rating on Bermaz with unchanged target price of RM2.42. BAuto declared a first interim dividend of 5.0 sen per share, translating to a payout ratio of 58.1% (1QFY23: 3.0 sen at 70.0% payout ratio).

• Revenue for 1QFY24 increased to RM1,089.3m (+51.9% YoY, +1.6% QoQ) mainly due to the increase in sales volume for Mazda marque domestic operations. Total sales volume for 1QFY24 increased to 6,648 units (+54.8% YoY, +5.2% QoQ), mainly led by Mazda CKD models which increased to 3,389 units (+80.4% YoY, -10.7% QoQ) and Mazda CBU models which increased to 1,609 units (+45.3% YoY, +56.1% QoQ). During the quarter, sales of Kia models stood at 606 units (+35.3% YoY, - 18.4% QoQ) while Peugeot sales decreased to 313 units (-34.0% YoY, - 25.8% QoQ).

• Net profit for 1QFY24 doubled to RM100.2m (+99.8% YoY, -0.4% QoQ), in line with the increase in overall sales volume, which further boosted by higher contribution from the Philippines’ operation and its associated company, Mazda Malaysia SB (MMSB). It was also aided by healthy margin from composition of sales mix and strengthening of the MYR against JPY. Operating margin improved to 12.0% compared to 9.8% in the same quarter last year.

• New launches ahead. The Mazda CX-60 has made its first Asean debut in the Philippines and BAuto plans to bring it to Malaysia in early 2024 (3QFY24). Kia’s current line-ups are Carnival MPV, available in both fully imported (CBU) and CKD models, the all-new Sorento (CKD), Niro EV and EV6 (CBU). Upcoming model for Kia is the all-new Sportage (TBA). For Peugeot, current line-ups are the 2008, 3008, 5008 SUVs and pickup truck, Landtrek. Upcoming models for Peugeot including the new e-2008 EV (TBA) and new 408 (TBA).

• Outlook. With strong performance of TIV in 1H2023, the Malaysia Automotive Association (MAA) had recently reviewed upward its full year 2023 TIV estimates to 725,000 units, from the forecast of 650,000 units. Reasons cited for the TIV increase are Malaysia’s stable economic outlook, new model launches and further improvement in the industry’s supply chain. While TIV continues to expand, we remain cautious and expect some normalisation in the near future considering the expiry of the SST holiday, rising interest rates and the weakening Ringgit against major currencies to dampen consumer confidence.

Source: PublicInvest Research - 13 Sept 2023