FY21 PATAMI of RM133.9m (+33%) beat expectations, by 51%/40% above our/consensus full-year estimate. The variance from our result is due to higher-than-expected margin from costs savings including reversal of over-accrued provision, the ending of aggressive promotion (i.e. in-house warranty extension), and lower A&P costs with the extension of SST exemption. As such, we increase FY22E CNP by 19%, and introduce FY23E CNP of RM133.1m (+12%), and hike our TP to RM1.45 (from RM1.30). The costs savings are varied in nature and may normalise in the upcoming quarters especially with the expected eventual ending of SST exemption. Maintain MP.

FY21 above expectations. FY21 PATAMI of RM133.9m (+33%) beat expectations by 51%/40% above our/consensus full-year estimate. The variance from our result is due to higher-than-expected margin from costs savings. A final interim DPS of 1.5 sen and special DPS of 1.75 sen was declared, bringing FY21 DPS to 6.5 sen (FY20: 7.45 sen), as expected.

YoY, FY21 PATAMI rose 33%, at a stronger pace than sales (+30%) largely due to expansion in EBIT margin by 0.9ppt to 7.0% from 6.1% in FY20 from a string of cost saving efforts in 4QFY21 including reversal of over-accrued provision (volume commitment fee), the ending of aggressive promotion (i.e. in-house warranty extension), and lower A&P costs with the extension of SST exemption. This was despite overall lower contribution from associates (-23%) with: (i) MMSB at RM13.5m (-39%), offset by (ii) Inokom at RM6.7m (+54%), and (iii) BAASB at RM0.2m (n/a) with minimal orders from both the domestic and export markets during the MCO and CMCO periods. Overall, Mazda’s FY21 sales were at 14,684 units (+25% YoY).

QoQ, 4QFY21 PATAMI surged 102%, outpacing the sales growth (+7%) mainly due to: (i) expanding EBIT margin by 5.2ppt to 11.2%, from 6.0% in 3QFY21 from a string of cost saving efforts as mentioned above, (ii) stronger associates (+101%) with the stronger earnings contribution from Mazda Malaysia SB (MMSB) at RM12.7m (+165%), and BAASB at RM0.1m (+503%), offset by Inokom at RM0.4m (-83%), and (iii) lower effective tax rate of 21.1% (3QFY21: 22.8%). Sales rebounded from sluggish showroom activity from temporary closure of automotive factories in the 1st week of MCO 2.0. The higher profit contribution from MMSB was mainly due to the improvement in gross profit and reversal of over-accrued provisions. Overall, Mazda’s 4QFY21 sales were at 4,094 units (+4% QoQ).

Exciting new launches ahead. Mazda’s current line-ups are the Mazda 3 (CBU, July 2019), CX-5 (CKD, 22nd Oct 2019), CX-8 (CKD, 13th November 2019), CX-30 (CBU, 15th January 2020), CX-9, Mazda 2 and MX-5 RF (3rd March 2020). New Mazda launches are the all-new CX-3 IPM version (CBU, July/Aug 2021-500 pre-order booking), CKD for CX-30 (CY2021/22), CX-5/CX-8 IPM version (mid-2022) and all-new Mazda MX- 30 (CY2021/22). PEUGEOT current line-ups are 3008 and 5000 SUV, while upcoming models are 2008 SUV (Dec 2021), 3008/5008 IPM version (July 2022), 3008 EV CBU (in discussion), and 508 Electric Hybrid (in discussion). KIA upcoming line ups are all-new Kia Karnival (CKD, Apr 2022), Sportage PHEV (CY2022, CKD 2023), and EV 6, Niro (depending on NAP regulation),

We increase FY22E CNP by 19% and introduce FY23E CNP of RM133.1m (+12%), to reflect the cost saving measures taken.

Maintain MP with a higher TP of RM1.45 (from RM1.30) based on unchanged 13x CY22E EPS (at 5-year Fwd. historical mean PER). Risks to our call include: higher/lower car sales volume, and forex falling outside the range of our expectations.

Source: Kenanga Research - 21 Jun 2021