MBMR reported core PATMI RM64.9m for 2QFY22 (+14.8% QoQ; +290.8% YoY) and RM121.5m for 1HFY22 (+90.7% YoY), above HLIB’s expectation (54.2%) and consensus (58.6%). We expect MBMR to continue leveraging on the strong automotive sales in 2HFY22, given the high order backlogs. Declared an interim dividend of 6 sen/share and a special dividend of 10 sen/share. Maintain BUY on MBMR with unchanged TP: RM5.00 based on 10% discount to SOP of RM5.60. MBMR offers attractive dividend yield of 6.7%-8.5% for FY22-24.

Above expectation. Reported core PATMI of RM64.9m for 2QFY22 (+14.8% QoQ; +290.8% YoY) and RM121.5m for 1HFY22 (+90.7% YoY). We deem the result above HLIB’s forecast (54.2%) and consensus (58.6%). EI gains of RM40.4m were excluded in 1HFY22, mainly attributed to the disposal gain from OMI Alloy assets of RM43.7m and netting off the RM2.8m tax for RPGT.

Dividend. Declared an interim dividend of 6 sen/share and a special dividend of 10 sen/share (both ex-date: 8 Sep 2022).

QoQ. Reported core PATMI of RM64.9m (+14.8% QoQ), mainly due to higher group sales volume (see Figure #3), resulting higher EBIT and stronger contribution from JV/associates (see Figure #2), as OEMs and dealers accelerated production and deliveries during the period in anticipation of the ending of SST exemptions.

YoY/YTD. Core PATMI improved to RM64.9m (+290.8% YoY) in 2QFY22 and RM121.5m for 1HFY22 (+90.7% YoY), on higher overall group sales volume and margins, combined with higher contributions from associate Perodua (see Figure #3), as the SPLY was affected by lockdowns and movement controls.

OMI Alloy. The group has disposed the remaining assets of the discontinued OMI Alloy plant and machinery for RM8.1m in 2QFY22. Back in 1QFY22, the group reported disposal of OMI Alloy assets at RM65.5m, netting disposal gain of RM32.8m (after netting off RM2.8m tax for RPGT).

Outlook. The group will leverage on the strong carried-over order backlog and strong demand for cars in 2HFY22. Perodua’s order backlog is estimated over 250k units, and we understand that Perodua has put up an aggressive production plan until March 2023 in order to fulfil the backlog. However, management cautioned on the underlying issue of supply chains, along with the threat of material price increase and recent appreciation of USD. The group will continue to manage its cost through process improvement and cost rationalization exercise to remain competitive.

Forecast. Raised FY22 earnings by 6.9%, but reduced FY23 and FY24 earnings by 0.8% and 5.9% respectively, as we assume accelerated deliveries in FY22.

Maintain BUY, TP: RM5.00. Maintain BUY on MBMR with an unchanged TP of RM5.00 based on 10% discount to SOP: RM5.60. 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 6.7%-8.5% for FY22-24.

Source: Hong Leong Investment Bank Research - 26 Aug 2022