Period  3Q13/9M13

Actual vs. Expectations The group reported 3Q13 PATAMI of RM31.7m, taking its 9M13 PATAMI to RM183.1m.

 Excluding the exceptional item of one-off provision of Nissan Vietnam Co. Ltd (NVL) additional import duties amounted to RM56m, the 9MFY13 core PATAMI of RM239.1m accounted for 85% and 70% of our and the consensus full year estimates respectively. The main positive deviation was the lower cost of sales thanks to the weaker Yen against USD and MYR.

Dividends  As expected, no dividend was declared under the quarter reviewed.

Key Results Highlights YoY, the 9M13 revenue grew by 32% mainly driven by higher vehicle sales volume on the back of the new launching for the Nissan Almera, Serena S-Hybrid and Grand Livina. With that, Nissan has retained its No.2 position in the non-national car segment taking 8% of the industry volume of 488k units for 9M13. Positively, the group’s EBIT improved by leaps and bounds with 70% growth on the back of higher EBIT margin of 7.3% (+1.6ppts) despite the impact by the one-off additional import duties of RM56m. Delving deeper, the higher EBIT margin was driven by the weakening of Yen as well as the better economic of scales which translate into higher operational efficiency.

 QoQ, the 3Q13 revenue increased by 11%, reflective of the normalisation from the low base in 2Q13 (which was due to the delayed purchase and cancellation of bookings by customers in anticipation of lower car prices during the GE period). However, the group registers a lower EBITDA of RM77.5m (-35.8%) dragged down by the one-off additional import duties. If we were to exclude the one-off adjustment, EBITDA would have grown by 11%, mirroring the similar quantum of growth at the top line with unchanged EBITDA margin of 10.6%.

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 ours and the MAA’s 2013 TIV forecast (ours: 636,560; MAA: 640,000) if we were to take the low-end number guidance as a benchmark. We reckon this is achievable (recall that the YTD July sales of Nissan is already clawing c.8 % of the market share) with the encouraging response from the Serena SHybrid sales and Grand Livina.

Change to Forecasts Post results, we have increased our FY13-FY14 PATAMI by 17%-8% to account for higher EBITDA margin of 10%-9.5% (from 8.8%-9%) after taking into account of weaker Yen vs. USD and MYR assumptions.

Rating Maintain OUTPERFORM

Valuation  Inline with our earnings revisions, our TP raised to RM7.70 (from RM7.50) based on a targeted PER multiple of 14.1x (being the +1SD above its 3-year average forward PER).

Risks to our Call Weak consumer sentiments.

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

Source: Kenanga