1QFY21 PATAMI of RM9.2m (-85% YoY, +276% QoQ) came in at 8%/6% of our/consensus full-year estimate. We deem the results as within our expectation as we expect stronger recovery ahead underpinned by the SST-exempted sales. Upgrade to MP from UP with unchanged TP of RM1.30 based on 10x CY21 EPS (-1.0 SD on 5-year mean fwd. PER). Note that, the share price has fallen 12% since our last UP call.

1QFY21 within our expectation. 1QFY21 PATAMI of RM9.2m (-85% YoY, +276% QoQ) came in at 8%/6% of our/consensus full-year estimate. We deemed the results as within our expectation as we expect stronger recovery ahead underpinned by the SST-exempted sales. A 1st Interim DPS of 0.5 sen (1QFY20: 3.25 sen) was declared for the quarter, as expected.

YoY, 1QFY21 PATAMI plunged 85%, despite sales decreasing at a lower rate of 16%, largely due to: (i) contraction in EBIT margin by 6.4ppt to 4.1% from 10.5% in 1QFY20 due to aggressive promotional campaigns, for the local market, such as the free 6-year warranty and 6-year free maintenance to boost sales, (ii) share of loss contribution from one of its associated companies, Mazda Malaysia SB due to the significant drop in unit sales with minimal orders from both the domestic and export markets during the MCO and CMCO periods, and (iii) higher effective tax rate of 34.5% (1QFY20: 20.9%). Overall, Mazda sales was at 2,840 units (-25% YoY).

QoQ, 1QFY21 PATAMI surged 276% with (i) corresponding surge in sales (+50%) from the post-MCO recovery in total unit sales by 49%, and supported by (ii) expanding EBIT margin by 3.4ppt to 4.1%, from 0.7% in 4QFY20 in line with the increase in sales, and lower inventory holding costs. The surge in sales was attributed to 100% sales tax exemption on CKD models and 50% sales tax exemption on CBU models from 15 June to 31 December 2020, and supported by the promotional campaign with free 6-year warranty and 6-year free maintenance to boost sales, partly offset by share of loss contribution from Mazda Malaysia SB.

New launches. BAUTO had launched the all-new Mazda 3 Sedan and Hatchback (CBU, July 2019), face-lifted and turbo variants of CX-5 (CKD, 22nd Oct 2019), all-new CX-8 (CKD, 13th November 2019), all- new CX-30 (CBU, 15th January 2020), 2020 Mazda CX-9, face-lifted Mazda 2 and 2020 Mazda MX-5 RF (3rd March 2020). BAUTO will also introduce the face-lifted CX-3 (CY2020), and all-new Mazda MX-30 (CY2021).

Upgrade to MP from UP with unchanged TP of RM1.30 based on 10x CY21 EPS (-1.0SD on 5-year mean fwd. PER).

Risks to our call include: (i) lower-than-expected car sales volume, and (ii) unfavourable forex.

Source: Kenanga Research - 11 Sep 2020