Bermaz Auto Bhd (BAuto) reported a sequentially weaker net profit of RM90.0m (+37.2% YoY, -10.1% QoQ) for 2QFY24, mainly attributed to lower sales volume and higher cost due to promotional activities. Cumulative 1HFY24 net profit of RM190.3m (+64.3% YoY) beat both our and consensus expectations however, accounting for 88.9% and 62.5% of full-year estimates respectively. The discrepancy in our numbers was mainly due to stronger-thanexpected demand for Mazda CX-30 and better contribution from Philippines operation and associated companies. We revise our FY24-25 earnings higher by 10-40% as we raise our vehicle sales assumption for the Mazda marque. We maintain our Neutral rating on Bermaz however, though with a higher target price of RM2.67 based on 12x CY25 EPS. A second interim dividend of 5.0 sen per share was declared for the quarter, translating to a payout ratio of 64.7% (2QFY23: 3.5 sen at 62.1% payout ratio).

• Revenue for 2QFY24 was sequentially weaker at RM1.01bn (+28.6% YoY, -7.6% QoQ) on lower sales volume QoQ, at 5,574 units (+10.3% YoY, -16.2% QoQ). However, it was stronger YoY owing to robust demand for Mazda CX-30 (CKD). During the quarter, Mazda CKD models increased to 4,006 units (+44.6% YoY, +18.2% QoQ). This was partly offset by weaker sales of Kia models (+3.9% YoY, -34.7% QoQ) and Peugeot models (-58.7% YoY, -16.9% QoQ) at 396 units and 260 units respectively.

• Net profit for 2QFY24 was also sequentially weaker at RM90.0m (+37.2% YoY, -10.1% QoQ) in line with the lower sales volume. This was partly lifted by higher contribution from the Philippines’ operation (+159.7% YoY, +11.2% QoQ) and associated companies (+55.5% YoY, +66.9% QoQ), namely Mazda Malaysia SB (MMSB) and Inokom.

• New launches ahead. BAuto plans to bring the Mazda CX-60 (CBU) to Malaysia in early 2024 (3QFY24). Upcoming model for Kia is the all-new Sportage (CKD), tentatively in late 2024.

• Outlook. Despite positive car sales momentum, forward car sales orders are showing signs of easing. We expect total industry volume (TIV) to shift to low gear going into 2024 after hitting record highs in 2023. A number of factors including elevated living costs, high interest rates and softer demand for discretionary items may restrain sales volume. In addition, stiff competition and competitive pricing may pressure sector margins and curb earnings momentum despite the strong orders.

Source: PublicInvest Research - 13 Dec 2023