Although 9MFY22 PATAMI of RM77.0m (+15%) came in at 65%/58% of our/consensus full-year estimates, we deemed the results to be within our expectation. This is because we expect seasonally stronger sales in the 4Q especially after the Chinese New Year (CNY) holiday as well as higher delivery of CBU units expected by April from earlier supply disruption. Maintain MP with a TP of RM1.65. The stock also offers a dividend yield of 3.5%.

9MFY22 within our expectation. Although 9MFY22 PATAMI of RM77.0m (+15%) came in at 65%/58% of our/consensus full-year estimates, we deemed the results to be within our expectation. This is because we expect seasonally stronger sales in the 4Q especially after the CNY holiday as well as higher delivery of CBU units expected by April, recovering from an earlier supply disruption. A 3rd interim DPS of 2.25 sen was declared, bringing 9MFY22 DPS to 4.25 sen (9MFY21: 3.25 sen), as expected.

YoY, 9MFY22 PATAMI rose 15%, despite drag in sales (-13%) largely due to: (i) expansion in EBIT margin by 1.5ppt to 6.8% from 5.3% in 9MFY21 from a string of cost saving efforts 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, as well as (ii) lower finance costs and lower effective tax expense at 24.4% (9MFY21: 26.4%). This was also supported by the improved contribution from associates (+45%) with: (i) MMSB reporting a profit of RM8.8m compared to a loss of RM5.5m in 9MFY21, (ii) Inokom with profit of RM20.6m (-5%), and (iii) KIA Malaysia with a loss of RM1.9m (n.a.) with minimal orders from both the domestic and export markets during the MCO and CMCO periods. The lower sales was due to the full lockdown in Phase 1 from 1st June 2021 until 15th August 2021 with total 9MFY22 group sales at 8,926 units (-16% YoY). Breakdown of sales:- Mazda CKD sales at 5,516 units, Mazda CBU sales at 2,837 units, Peugeot sales at 416 units, and Kia sales at 157 units.

QoQ, 3QFY22 PATAMI surged 56%, outpacing the strong sales growth (+29%) from the re-opening of the automotive sector post-lockdown mainly due to: (i) expanding EBIT margin by 1.5ppt to 8.0%, from 6.5% in 2QFY22, and (ii) lower effective tax rate at 22.5% (2QFY22: 25.7%) due to certain expenses or losses being disallowed for tax purposes, different foreign tax rates and the inclusion of the share of results of associates presented net of tax in the previous quarters. Overall, total group 3QFY22 sales were stronger at 3,945 units (+29%) on better post-lockdown demand.

Exciting new launches ahead. Mazda’s current line-ups are the Mazda 2, Mazda 3, Mazda 6, CX-3, CX-5, CX-8, CX-30, CX-9, BT-50 and MX-5 RF. New Mazda launches are the all-new CX-3 IPM4 version (Jan 2022), CX- 30 IPM4 version (Feb 2022), CX-8 IPM4 version (June 2022) and all-new Mazda MX-30 EV (3Q 2022). PEUGEOT’s current line-ups are the 2008, 3008 and 5008 SUVs, while upcoming models are 3008/5008 IPM version (July 2022), all new e-2008 EV CBU (4Q 2022), and 508 Electric Hybrid (in discussion). Kia’s current line-ups for now is Carnival with upcoming moels such as Sportage PHEV (3Q/4Q 2022, CKD 2023), EV6/PBV1 EV (3Q/4Q 2022), and all new Niro/Seltos (4Q 2022). (refer to image table overleaf)

Maintain MARKET PERFORM with a TP of RM1.65 based on 15x CY22E EPS (at 5-year Fwd. historical mean PER).

Risks to our call include: lower car sales volume, and forex falling outside the range of our expectations.

Source: Kenanga Research - 11 Mar 2022