• Maintain BUY (TP: 4.70). MBM’s 9MFY23 Core PATAMI of RM207mn (+24% YoY) was in line with our and consensus expectations, accounting for 79.6% and 80% respectively. In 3QFY23, both revenue and net profit increased by +3.6% and +11.9% YoY respectively, driven by higher vehicle sales, notably from Perodua and increase after-sales revenue. Perodua achieved a total 9MFY23 of 233,227 units in vehicle sales, marking an 18.8% increase compared to the 9MFY22 with 196,354 units. In 3QFY23, the company declared a 2nd interim DPS of 6.0sen and a special dividend of 7.0sen, bringing the 9MFY23 DPS to 39.0sen, which was markedly higher than the 9MFY22 DPS of 16.0 sen - translating to a DY of 9%. We expect MBM to maintain positive earnings by capitalising on improved sales and production volume through confirmed backlog orders for Perodua, and healthy near-term vehicle demand. Maintain a BUY call for MBM’s with new TP to RM4.70 (from RM4.80) as we roll forward our valuation base year to FY24F. Our valuation is now pegged at MBM’s 5- yrs forward PE of 7.3x and FY24F EPS of 64.6sen.

• Key Highlight. MBM’s revenue of RM621.3mn is on par with 3QFY22 (RM621.2mn) and has increased by 15.1% QoQ, driven by higher sales and production volume, primarily attributed to an increased supply of vehicles, notably from Perodua's supplier. However, there was a significant YoY increase in net profit of +73.9%, driven by the improved performance of associates, contributing an additional RM23.0mn, and the recognition of a gain of RM28.4mn from the disposal of a vacant piece of land in Bandar Sri Sendayan, Negeri Sembilan. Additionally, the higher sales volume from the Auto Parts Manufacturing Division was due to longer working days compared to the last quarter, which had more public holidays and scheduled shutdowns by OEMs.

• Earnings revision. No changes to our forecast.

• Outlook. We anticipate that MBM will maintain positive earnings by capitalising on improved sales and production volume due to healthy near-term vehicle demand and confirmed backlog order for Perodua. However, we urge caution regarding the impending luxury tax imposition, as it is anticipated to impact the sales of luxury cars, particularly those from Volvo and Volkswagen.

Source: BIMB Securities Research - 27 Nov 2023