KUALA LUMPUR (Dec 13): Analysts have raised the target prices of Bermaz Auto Bhd after the auto distributor reported better-than-expected half-year earnings, despite expectation of a slow down in car sales in 2024.

On Tuesday (Dec 12), Bermaz Auto reported that its net profit for the first half of its financial year ended Oct 31, 2023 (1HFY2024) jumped 59.8% to RM203.62 million from RM127.42 million a year ago, as revenue grew 39.76% to RM2.1 billion from RM1.5 billion in 1HFY2023, beating analysts' forecasts.

The stronger revenue is driven by better performance from its Mazda operations in Malaysia, with the CX-30 CKD (completely knocked down) model continuing to chart higher sales since it was unveiled in March.

TA Securities said Bermaz Auto's 1HFY2024 core net profit accounted for 67% of its full-year estimates and 62% of consensus' estimates. It said the results beat analysts' expectations, mainly due to higher-than-expected sales volume and contribution from associates.

Despite expecting car sales volume to soften in 2HFY2024, TA Securities tweaked Bermaz Auto's FY2024 earnings upwards by 16.3%, after incorporating the higher-than-expected 2QFY2024 results and revising sales volume assumptions higher by 9.3%.

"We expect the sales volume to soften in 2HFY2024 due to the absence of sales tax incentives and weak consumer sentiment," it said.

TA Securities raised the target price for Bermaz Auto by 1.3% to RM2.33, upgrading its call on the stock to "hold" from "sell" previously.

AmInvestment Bank also raised the fair value of Bermaz Auto to RM3.42 per share, from RM3.29 previously, despite maintaining its "buy" call on the stock.

It said the auto distributor's 1HFY2024 core net profit accounted for 59% of its full-year forecast for FY2024. As such, AmInvestment Bank revised its full-year forecasts upwards by 4%, to take into consideration higher associate contribution and slightly increased sales volume assumption.

"We raised our FY2024 sales volume assumption by 3% to 24,700 units, from 23,900 units previously," it said.

"Based on our channel check, Mazda currently has a backlog order of 2,500 units as of December 2023, and targets to achieve an average 18,000 units of backlog orders in FY2024-FY2025. We continue to like Bermaz Auto for its attractive model rollouts and CKD model expansions.

"The facelifted CX-5 model, Mazda’s volume driver, is expected to be launched by early next year, which we foresee will contribute to an upward booking trend and higher order backlogs that will support the momentum of motor vehicle sales," AmInvestment Bank added.

PublicInvest Research maintained its "neutral" rating on Bermaz Auto, though with a higher target price of RM2.67, from RM2.42 previously.

The research house revised its FY2024-FY2025 earnings higher by 10-40%, as it raised its vehicle sales assumption for the Mazda marque. Despite positive car sales momentum, PublicInvest Research said forward car sales orders are showing signs of easing.

"We expect total industry volume to shift to low gear going into 2024, after hitting record highs in 2023. A number of factors including elevated living costs, high interest rates and softer demand for discretionary items may restrain sales volume. In addition, stiff competition and competitive pricing may pressure sector margins and curb earnings momentum despite the strong orders," it said.

Shares in Bermaz Auto Bhd rose as much as nine sen or 3.9% to an intra-morning high of RM2.39 on Wednesday.

At 11.18am, the shares pared some of its gains to RM2.36 — up six sen or 2.61% — giving it a market capitalisation of RM2.76 billion. Year-to-date, the counter has risen by 25 sen or 11.85%.

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