• Maintain BUY (TP: RM2.80). Bermaz Auto (BAuto) reported a 6MFY24 PATAMI of RM190mn (+37.2% YoY), surpassing both our and consensus expectations by 80% and 61%, respectively. In 6MFY24, revenue increased by +28.6% YoY, driven by continuous sales of new Mazda CX- 30 CKD model launching in March 2023 and backlog order fulfilment. The group declared a second interim dividend of 5.0sen per ordinary share, bringing the cumulative 6MFY24 DPS to 10.0sen (7.0sen in 6MFY23). We anticipate positive earnings for BAuto, due to i) healthy demand, ii) the launch of an attractive new model, and iii) its role as a major distributor for the PEUGEOT dealership. We maintain a BUY call for BAuto with a new TP of RM2.80 (RM2.68 previously) as we roll forward our valuation base year to FY25F. Our valuation is now set at a lower PER of 10.5x (BAuto’s -0.5SD average 5-year PER) to FY25 EPS of 27.0sen. The lower valuation is to account for the conservative TIV normalization for CY2024.

• Key Highlight. In 2QFY24, revenue decreased by -7.6% QoQ, attributed to a reduction in contributions from operations in the Philippines (-16% QoQ, from 730 units to 610 units) and a drop in sales volume for Kia (- 35% QoQ, from 606 units to 396 units). YoY, PATAMI rose by 37.2%, primarily due to the fulfilment of remaining backorders from the SST exemption.

• Earnings revision. We have revised our FY24, FY25, and FY26 earnings forecasts higher to RM395mn (+66%), RM309mn (+26%), and RM285mn (+15%), respectively. This adjustment takes into consideration the betterthan-expected 2QFY24 results and the subsequent upward revisions to sales volume assumptions.

• Outlook. We expect BAUTO to maintain its positive earnings through i) strong demand, especially for Mazda CBU CX3 and Mazda CKD CX-30, supported by a backlog of orders (currently at 2,500 units as of November), ii) the upcoming launch of new attractive models (CX-5 IPM5, CX-5 IPM6, and CX-60), and iii) despite Stellantis (owner of PEUGEOT) not renewing the contract, they will collaborate on vehicle sales as a major distributor, providing after-sales service to customers. However, we exercise caution regarding potential factors affecting earnings, particularly the impending luxury tax that may impact sales in BAuto's luxury car segment.

Source: BIMB Securities Research - 13 Dec 2023