• Maintain HOLD (TP: 4.28). MBM’s FY23 Net Profit of RM334mn (+24.5% YoY) was above with our and consensus expectations, accounting for 128% and 120% respectively. The higher growth in FY23 revenue to RM2.4bn (+4.7% YoY), can be attributed to i) heightened vehicle sales, particularly in Perodua's performance, alongside an increase in aftersales revenue and ii) contributions from joint ventures, driven by high production demand from carmakers and effective cost recovery measures. Notably, Perodua achieved a total of 330,325 units in vehicle sales for fiscal year 2023, marking a substantial increased by 17.1% YoY. In 4QFY23, the company did not declare any dividend. We maintain a cautious outlook on MBM, considering potential challenges stemming from the decline in customer sentiment towards purchasing high-value items. Maintain a HOLD call for MBM’s with unchanged TP to RM4.28 pegged at 6.6x PER (based on +0.5SD of 5-year mean PER) to FY24F EPS of 64.6sen.

• Key Highlight. MBM’s 4QFY23 revenue and net profit increased by +7.5% YoY and 71.2% YoY, respectively. This growth was primarily driven by i) Auto Parts Manufacturing division showcased improved performance, benefitting from robust production volume as carmakers escalated their production demands towards the year-end period, ii) contributions from joint ventures and associates played a significant role, supported by strong demand from key market leaders to fulfil outstanding bookings. However, on QoQ basis, there was a decline in net profit by -6.6% QoQ due to the disposal of a vacant piece of land in Bandar Sri Sendayan, Negeri Sembilan, during the previous quarter.

• Earnings revision. Maintain our forecast at this juncture.

• Outlook. We maintain caution on MBM due to potential challenges linked to declining consumer sentiment toward high-value purchases. This is primarily driven by reduced backlog orders, TIV normalisation, an 8% SST increase, the introduction of the RON95 subsidy, and upcoming luxury tax implementation, expected to impact sales of luxury vehicles, particularly Volvo and Volkswagen. Consequently, we do not anticipate substantial earnings growth in the near future due to the prevailing weakened consumer sentiment.

Source: BIMB Securities Research - 29 Feb 2024