MBMR reported core PATMI RM56.2m for 4QFY22 (-7.7% QoQ; -37.5% YoY), achieving a record RM238.4m for FY22 (+60.9% YoY), within HLIB’s expectation (99.3%) and consensus (104.9%). We expect MBMR to continue leveraging on the strong Perodua momentum in 2023, mainly driven by the high order backlogs and strong demand for its newly launched Axia model. Maintain BUY on MBMR with unchanged TP of RM5.00 based on 10% discount to SOP of RM5.60. MBMR offers attractive dividend yields of 6.6%-7.4% for FY23-24.

Within expectation. Reported core PATMI of RM56.2m for 4QFY22 (-7.7% QoQ; -37.5% YoY), bringing to new record high of RM238.4m for FY22 (+60.9% YoY). We deem the result within HLIB’s forecast (99.3%) and consensus (104.9%). EI gains of RM43.1m were excluded in FY22, mainly attributed to the disposal gain from OMI Alloy assets of RM43.7m and netting off the RM2.8m tax for RPGT.

Dividend. Declared a 2nd interim dividend of 6 sen/share and a special dividend of 15 sen/share (both ex-date: 6 March 2023). Total YTD dividend was 37 sen/share and we expect another final dividend of 6 sen/share, resulting total dividend of 43 sen/share (above HLIB’s expectation of 22 sen/share).

QoQ. Reported core PATMI of RM56.2m, a drop of -7.7%, mainly dragged by: (i) lower contribution from Automotive Components Manufacturing segment following lower sales volume and higher raw material costs; and (ii) higher effective tax rate during the quarter. We believe the associates experienced lower margins on depreciated USD/RM and higher raw material costs, given the marginal growth of associate contributions despite the substantial growth of Perodua sales volume by +22.0% QoQ (see Figure #4).

YoY. Core PATMI declined by -37.5% due to combination of lower operational margins following increase in raw material costs, labour costs (higher minimum wages) and RM depreciation (against USD) as well as lower contributions from Perodua associate due to recognition of tax incentives in SPLY.

YTD. Core PATMI improved by 60.9% to RM238.4m in FY22 mainly due to low base effect from major lockdowns SPLY. Hence, overall group sales volume and margins improved, combined with higher contributions from associates Perodua and Hino (see Figure #4).

Outlook. The group is expected to continue leverage onto the high industry order backlogs of 300k units in 2023. Perodua has been pushing for another record sales volume of 314k units and production volume of 330.0k units in 2023 (after recording record high 282.0k units and 289.1k units respectively in 2022), mainly driven by the high order backlogs of 220k units and strong demand for its newly launched Axia model. The group is also expected to benefit from the recent appreciation of RM against USD. Management will continue to manage its cost through process improvement and cost rationalization exercise to remain competitive.

Forecast. Unchanged.

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 (72.3 sen/share) with sustainable earnings and cash flow, by leveraging onto the strong demand for Perodua models. MBMR offers attractive dividend yields of 6.6%-7.4% for FY23-24.

Source: Hong Leong Investment Bank Research - 21 Feb 2023