MBMR reported core PATMI RM16.6m for 2QFY21 and RM63.6m for 1HFY21, within HLIB’ expectation (41.2%), but below consensus (34.0%). We expect MBMR to continue leverage on the strong automotive sales in 2HFY21, given the high backlog orderbook and on-going strong demand driven by the extended SST exemption measures until 31 Dec 2021 (and potentially a further extension). Maintain BUY on MBMR with unchanged TP: RM4.80 based on 10% discount to SOP of RM5.32. MBMR offers attractive dividend yield of 5.6%-7.7% for FY21-23.

Within expectation. Reported core profit of RM16.6m for 2QFY21 and RM63.6m for 1HFY21, within HLIB’s forecast of RM242.1m (41.2%), but below consensus of RM186.8m (34.0%). Despite being affected by various lockdown measures, the group still managed to register profitability during the quarter due to on-going cost savings initiatives.

Dividend. Management has declared a 1st interim dividend of 5 sen (ex-date: 9 Sep 2021) for FY21.

QoQ. Core PATMI declined 64.6% to RM16.6m, mainly due to lower group car sales volume (mainly Perodua) and parts/components as well as aftersales services, affected by the various lockdown measures implemented during the quarter.

YoY/YTD. Core PATMI improved to RM16.6m in 2QFY21 (vs. LATMI -RM5.1m in 2QFY20) and RM63.6m in 1HFY21 (vs. RM22.0m in 1HFY20) on overall higher group sales volume (attributed to the extended SST exemptions) and on-going cost cutting measures, resulting to improved profitability despite on-going lockdown measures.

Outlook. Management remained cautiously optimistic on the group’s outlook with the recent relaxation of lockdown measures. The optimism is backed by strong carried over orderbook and strong demand with the SST exemption extended until 31 Dec 2021 (and the industry is approaching government to further extend to 30 Jun 2022). The group will ramp up productions to meet the strong orderbook. MBMR has also benefited from the ongoing cost tightening measures and new marketing platforms in view of the changing consumer behavior from the pandemic. Management is expecting a stronger 2HFY21.

Forecast. Unchanged.

Maintain BUY, TP: RM4.80. Maintain BUY on MBMR with unchanged TP of RM4.80 based on 10% discount to SOP: RM5.32. MBMR is currently in a net cash position (62.9 sen/share) with continued earnings and cash flow growth, by leveraging onto the strong demand for Perodua models. MBMR offers attractive dividend yield of 5.6%- 7.7% for FY21-23.

Source: Hong Leong Investment Bank Research - 26 Aug 2021