HLIND’s 1QFY24 results met our expectation. Its 1QFY24 core net profit rose 7% YoY driven by higher sales and margins from the newgeneration Y15ZR SE, XMax 250 and Ego Gear. We like HLIND as its popular motorised two-wheelers are a good proxy to the booming gig economy. We maintain our forecasts, TP of RM11.40 and OUTPERFORM call.

HLIND’s 1QFY24 results met our expectation at 28% of full-year forecast (there is insufficient coverage by the market to form consensus estimates). It declared an interim NDPS of 20.0 sen (ex-date: 4 Dec; payment date: 21 Dec 2023) in 1QFY24 vs. 20.0 sen paid in 1QFY23, within expectation.

YoY, its 1QFY24 revenue fell 5% mainly due to weaker motorcycles sales affected by the credit tightening in motorcycles financing to avoid non-performing loans. Its plant utilisation level at both Yamaha Motor and Guocera production plants remained stable at 80%-90%. Its core net profit grew slightly stronger at 7% as higher margins from the newgeneration Y15ZR SE, XMax 250 and Ego Gear, were partially offset by a lower contribution from associate Yamaha Motor Vietnam (YMVN).

QoQ, its 1QFY24 revenue rose 9% driven by overwhelming demand for the new-generation Y15ZR SE, XMax 250 and Ego Gear (launched in July 2023). Its core net profit increased by a sharper 27% underpinned by higher margins from the new models and a lower effective tax rate.

Forecasts. Maintained.

We also keep our TP at RM11.40 based on FY24F PER of 12x, at a 1x multiple 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 - 20 Nov 2023