Period  2Q13/1H13

Actual vs. Expectations  The group reported 2Q13 net profit (NP) of RM67.4m, bringing 1H13 NP to RM151.4m. The results came in within our but below market expectations, making up 53% and 43% of the full year estimates respectively.

Dividends  An interim net dividend of 4.5 sen was declared (similar to 2Q12). Surprisingly, a special net dividend of 6.8 sen was also declared, bringing YTD net dividend to 11.3 sen, representing c.2% net yield.

Key Results Highlights  YoY, the 1H13 revenue grew 31% mainly driven by higher sales volume on overwhelming demand for the Nissan Almera (1H sales >15k units representing 59% of total vehicles sales in 1H13). With that, Nissan has retained its No. 2 position in the non-national car segment taking 8.2% of the industry volume of 313.5k units for 1H13. Meanwhile, the group’s EBIT improved leaps and bounds by 102% on the back of higher EBIT margin of 8.7% (+2.8ppts). This was helped by the weakening Yen as well as the better economies of scale (additional 9.5k units YoY) which translated into higher operational efficiency.

 QoQ, the 2Q13 revenue declined by 21% dragged down by the automotive segment (-19%) as buyers delayed making purchases and also cancellation of bookings by customers in anticipation of lower car prices during the GE period. As a result of lower sales, the impact flowed through to the bottom line with PAT declining by 20%.

Outlook  The group is eyeing to achieve a sales target of 58k-60k units in 2013. This represents an estimated market share of 9% of our and the MAA’s 2013 TIV forecast (ours: 641,560; MAA: 640,000) if we were to use the lower-end number guidance. We reckon this is achievable (recall that the YTD July sales of Nissan is already commanding c.8.2% of the market share) with the encouraging response from the Serena S-Hybrid sales (YTD at 1.9k) coupled with the upcoming new model of Nissan Livina.

Change to Forecasts  We leave our earnings forecast unchanged.

Rating   Maintain OUTPERFORM

Valuation  Our TP remain unchanged at RM7.50. This is based on a targeted PER multiple of 14.8x (being the +1SD above its 3-year average forward PER).

Risks  Weak consumer sentiments.

 Unfavourable forex trends (weakening of the Ringgit against the USD and the JPY), which may compress margin.

Source: Kenanga