HLIND’s FY23 results met our expectations. Its FY23 core net profit jumped 53% following the economy reopening. It has recently put onto the market new-generation Y15ZR SE, XMax 250 and Ego Gear which shall drive sales in FY24. We maintain our forecasts, TP of RM11.40 and OUTPERFORM call.

HLIND’s FY23 results met our expectations (there is insufficient coverage by the market to form consensus estimates). It did not declare a dividend during the quarter, as it typically announces an annual dividend during 1H.

YoY, HLIND’s FY23 revenue rose 39% on the economy re-opening with stable production at both Yamaha Motor and Guocera production plants (FY23 plant utilisation in the range of 80%-90%, compared to 60%-70% in FY22).

However, its EBIT only grew 23% as it booked in high-cost inventories procured during the period of supply chain disruptions. In the absence of prosperity tax, its core net profit rose by a larger magnitude of 53%.

In terms of motorcycle industry TIV, the number rose to 650,000 units (+3%) Malaysia and 2.58m units (+2%) in Vietnam.

QoQ, HLIND’s 4QFY23 revenue fell 17% mainly due to reduced production capacity of the Yamaha popular models in anticipation of the launching of new-generation Y15ZR SE, XMax 250 and Ego Gear (which happened in Jul 2023). Nevertheless, its EBIT only eased 1% with the gradual run-down of high-cost inventories. Its core net profit rose 5% thanks to a lower effective tax rate.

Forecasts. We maintain our FY24 forecasts and introduce FY25F numbers.

We also keep our TP at RM11.40 based on FY24F PER of 12x, at 9% premium to passenger vehicle sector’s average forward PER of 11x given its strong market position in the local motorcycle segment which prospects are buoyed the booming gig economy. There is no adjustment to our target price based on ESG given a 3-star rating as appraised by us (see Page 4).

We like HLIND: (i) as it is a strong proxy to the booming gig economy given the critical role of motorised two-wheelers in executing online delivery transactions, (ii) for its association with the strong Yamaha motorcycle brand in Malaysia and the brand’s market leader position in the local motorcycle segment, and (iii) for its strong war chest with a net cash of RM1.6b which could be deployed for earnings-accretive acquisitions. Its dividend yield is attractive at 7%. Maintain OUTPERFORM.

Risks to our call include: (i) consumers cutting back on discretionary spending (particularly big-ticket items like new motorcycles) amidst high inflation, (ii) supply chain disruptions, (iii) escalating input costs, and (iv) a global recession hurting demand for the export of its motorcycles and tiles.

Source: Kenanga Research - 24 Aug 2023