6MFY21 PATAMI of RM34.0m (-52%) came in at 36%/29% 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 (till year-end) led sales rush and its 6-year free warranty and 6-year free maintenance promotions. Maintain MARKET PERFORM with unchanged TP of RM1.40 based on 12x CY21E EPS (at 5-year fwd historical mean PER).

6MFY21 within our expectation. 6MFY21 PATAMI of RM34.0m (- 52%) came in at 36%/29% 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 (till year-end) led sales rush and its 6-year free warranty and 6-year free maintenance promotions. A 2 nd interim DPS of 1.25 sen (2QFY20: 2.75 sen) was declared, bringing YTD-DPS to 1.75 sen (6MFY20: 6.00 sen), as expected.

QoQ, 2QFY21 PATAMI surged 168% with (i) corresponding surge in sales (+34%) from the post-MCO recovery in total unit sales to 3,802 units (+34%) and supported by (ii) expanding EBIT margin by 1.6ppt to 5.7%, from 4.1% in 1QFY21 in line with the increased sales and lower inventory holding costs, (iii) associates turning profitable at RM1.8m compared to loss of RM1.9m in 1QFY21, and (iv) lower effective tax rate of 27.6% (1QFY21: 34.5%). Associates turned profitable with the stronger Inokom Corporation’s earnings (+11%), and lower share of losses at Mazda Malaysia SB (MMSB) at RM0.253m compared to a loss of RM3.8m in 1QFY21 as MMSB was still on lower production mode to clear existing inventory from the MCO period.

YoY, 6MFY21 PATAMI plunged 52%, despite higher sales (+6%) largely due to: (i) contraction in EBIT margin by 3.0ppt to 5.0% from 8.0% in 6MFY20 due to aggressive promotional campaigns for the local market, (ii) share of loss contribution from one of its associate companies, Mazda Malaysia SB (-RM4.0m) due to significant drop in unit sales with minimal orders from both the domestic and export markets during the MCO and CMCO periods, partly offset by stronger Inokom Corp (RM3.8m), and (iii) higher effective tax rate of 29.6% (6MFY20: 22.4%). Overall, Mazda 6MFY21 sales was at 6,642 units (- 4% YoY).

Exciting new launches ahead. 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-30 CKD (CY2021), and all-new Mazda MX-30 (CY2021).

Maintain MARKET PERFORM with unchanged TP of RM1.40 based on 12x CY21E EPS (at 5-year Fwd. historical mean PER).

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

Source: Kenanga Research - 11 Dec 2020