FY20 core PATAMI of RM165.8m (-20%), came in above our/consensus expectation at 119%/114% of full-year estimates due to higher-than-expected associates’ contribution. As such, we increase FY21E CNP by 13% and raised TP to RM4.60 (from RM4.10, previously). Reiterate OP. Perodua is targeting year-end 2021 higher sales volume of 240k units, production volume of 272k units and set to launch the all-new Perodua Ativa SUV on 3rd March 2021.

FY20 above expectations. FY20 core PATAMI of RM165.8m (-20%), came in above our/consensus expectation at 119%/114% of full-year estimates due to higher-than-expected associates’ contribution. A 2nd Interim dividend of 6.0 sen was declared for the quarter, as expected bringing FY20 DPS to 11.0 sen (FY19: 13.0 sen).

QoQ, 4QFY20 core PATAMI surged 21% despite lower sales (-6%) boosted by Associates (+19%) especially from 22.58%-owned Perodua ramping up production to full capacity to cater for the back-logged demand from the sales tax exemption. The lower sales were due to lower average price per unit due to it running out of the higher-margin models during the sales tax exemption period. Perodua sold 44,977 units (+6%), which we believe mostly came from Perodua Axia.

YoY, FY20 core PATAMI plunged 20% mainly due to closures of business operations during the MCO period which lasted till 4th May (2QFY20), when the conditional MCO was introduced. Perodua’s sales volume skidded to 220,163 units (-8%), which in turn affected MBMR’s associates’ contribution (-24%). Note that, the top-three selling models were still Perodua’s Myvi, Axia and especially the face-lifted Bezza.

Outlook. MBMR’s business strategy lies in: (i) its deep value stake in 22.58%-owned Perodua, and (ii) dual-income streams as the largest Perodua dealer and as parts supplier for most of the popular marques. Perodua’s market share is supported by higher delivery of all-new Myvi, all-new Perodua ARUZ, and face-lifted Bezza. Perodua is cautiously optimistic on CY21 prospects with tax exemptions and incentives on passenger vehicles helping to sustain volume until the end of the year. Perodua is targeting (i) year-end 2021 sales volume of 240k units (+9%) and (ii) all-time high production volume of 272k units. It is also set to launch the all-new Perodua Ativa SUV on 3rd March 2021.

Increase FY21E CNP by 13%. We increase FY21E CNP by 13% on stronger associates’ contribution.

Maintain OUTPERFORM with a higher TP of RM4.60 (from RM4.10), based on 9x FY21E EPS (at 5-year forward historical mean PER).

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

Source: Kenanga Research - 26 Feb 2021