Bermaz Auto Bhd (BAuto) posted another record year in FY24, with a sequentially stronger 4QFY24 net profit of RM90.2m (+28.0% QoQ) attributed to a change in sales mix and higher profit contributions from its associated companies, though weaker YoY (-10.3%) owing to the absence of sales tax exemption incentives. Cumulative FY24 net profit increased by 14.5% YoY to RM347.7m, beating both our and consensus expectations, accounting for 115.6% and 105.9% of full year estimates respectively. The discrepancy in our numbers was mainly due to better contribution from the Philippines’ operation and its associated companies. We adjust our FY25-26F forecast marginally higher by an average of 3% to account for better performance in its Philippines’ and associated companies’ operations. Consequently, our TP is revised slightly higher to RM2.80 (previously RM2.72). We retain our Neutral call however given limited upside to our revised TP. A total dividend of 11.75 sen per share was declared for the quarter, translating to a payout ratio of 152.5% (4QFY23: 11.00 sen at 127.3% payout ratio).

• Revenue for 4QFY24 was sequentially stronger at RM937.5m (+4.6% QoQ) due to a change in sales mix, though weaker YoY (-12.6%) on lower sales volume following the absence of sales tax exemption incentives. During the quarter, total unit sales fell 5.5% YoY to 5,480, though marginally higher QoQ (+0.3%). Total vehicle sales in the Malaysian operations fell to 4,843 units (-19.2% YoY, -0.3% QoQ), while Philippines’ operations posted stronger vehicle sales at 637 units (+93.1% YoY, +5.1% QoQ).

• Net profit for 4QFY24 was stronger sequentially at RM90.2m (+28.0% QoQ) due to a change in sales mix from its domestic Mazda marque and higher contribution from the Philippines’ operation and its associated companies which had recorded higher sales volume. However, it was weaker YoY (-10.3%) in tandem with lower sales volume following the expiry of the sales tax exemption incentive.

• New launches ahead. BAuto plans to bring the Xpeng G6 (CBU) to Malaysia in August 2024, and the Mazda CX-60 (CBU) and Kia all-new Sportage (CBU), tentatively in 4QCY24 (2HFY25).

• Subdued outlook. Forward car sales orders are showing signs of easing along with shorter waiting period. A number of factors including elevated living costs and softer demand for discretionary items due to concerns over targeted subsidy rationalization may restrict growth in sales volume. In addition, stiff competition from the influx of new model launches and competitive pricing in the market may pressure sector margins and curb earnings growth despite backlog orders remaining relatively healthy.

Source: PublicInvest Research - 12 Jun 2024