• Recently, BAuto announced that it was awarded the distribution rights for XPENG Motors, a Chinese Electric Vehicle (EV) manufacturer, enabling them to distribute and sale its marque and the spare parts, as well as to offer after-sales services for XPENG vehicles in Malaysia

• We expect minimal impact to BAuto’s earnings in near term as adoption to EV remain at initial stage in Malaysia. However, we are positive on its long-term potential as BAuto is complementing its product range, demonstrating a commitment to the automotive sector.

• No change to our earnings as the sales volumes will be insignificant during our forecast period.

• We maintain a BUY recommendation on BAuto with an unchanged TP of RM2.80 pegged at PER of 10.5x (BAuto’s -0.5SD average 5-year PER) to FY25f EPS of 27.0sen.

Bringing XPENG Marque Smart EV to Malaysia

Bermaz Auto (BAuto) recently announced that it has secured the distribution rights for Xpeng marque smart EV in Malaysia. Xpeng is a leading Chinese Smart EV manufacturer that focus on catering to techsavvy middle-class consumers via in-house development of advanced driver-assistance systems, intelligent operating systems, and core vehicle components. The company is headquartered in Guangzhou and it has manufacturing sites in Zhaoqing and Guangzhou, Guangdong, China.

Unique Selling Point for XPENG Smart EV

XPENG vehicles boast state-of-the-art features such as autonomous driving (AD), digital cockpits, and high-performance batteries. Currently, it is equipped with Navigation Guided Pilot software which allows user to navigate major Chinese cities like Beijing and Shanghai. We think its leading autonomous driving (AD) technology is a key factor leading to consumer choice towards XPENG in China. Over the next three years, XPENG plans to expand operations by investing in artificial intelligence to enhance efficiency and accessibility. This aligns with its mission to lead the smart EV transformation and improve customer mobility experiences. Referring to its official website, XPENG has delivered 4,545 units out of a total NEV market of 477,000 EV units in China, capturing a market share of 0.9% on February 2024.

Estimated Timeline for Launching

We estimate that the first launch for the XPENG model will take place in 1HFY25 with an initial sales target of a few hundred units. We think the capex requirement for this to be minimal due to the renovation of the existing outlet, previously a Peugeot showroom, now requiring only signage installation. The first model to be introduced will be the XPENG G6 EV SUV, featuring the company's first right-handed driver model (currently producing only left-handed models). The price for the G6 EV is estimated to be below RM200k, and BAuto plans to offer it in two battery variants with ranges of 580km and 755km respectively, along with a maximum DC fast charging rate of 480kW.

Earnings Impact to BAuto

We are neutral with the introduction of Xpeng to Malaysian market as we anticipate there may be some lag in the acceptance of the XPENG brand, particularly as it is entirely new to ASEAN. Additionally, the adoption of EVs in Malaysia is still in its early stage, and with the ongoing development of charging infrastructure, we expect this process to take time. However, we are optimistic that the innovative technological features and advancements offered by Xpeng will play a pivotal role in expediting consumer adaptation.

No Change to Earnings Estimate

We make no change in earnings forecasts as the sales volumes will be insignificant during our forecast period.

Reiterate BUY at TP of RM2.80

Maintain a BUY recommendation on BAuto with an unchanged TP of RM2.80. Our valuation is derived from lower PER of 10.5x (BAuto’s -0.5SD average 5-year PER) to FY25f EPS of 27.0sen. Overall, BAuto business prospect is to be driven by i) sustainability through the introduction of more green vehicles and technologies to manage and reduce our environmental impact, ii) strong demand by positive backlog order, and iii) potential expansion of operations in the Philippines, particularly through the introduction of Xpeng via Mazda's dealership network into the Philippine market.

Source: BIMB Securities Research - 21 Mar 2024