HLIND’s FY24 results beat our expectation. Its FY24 core net profit rose 18% YoY driven by credit easing by motorcycle financiers since 3QFY24, price hikes, and shift toward more premium products with strong margins. It introduced the all-new Yamaha PG-1 (priced from RM6,998) in August 2024 and looks to build a new Guocera tiles plant in 2026. We raise our FY25F net profit forecasts by 7%, lift our TP by 7% to RM13.50 (from RM12.60), and maintain our OUTPERFORM call.

HLIND’s FY24 core net profit (excluding one-offs at RM44m) exceeded our full-year expectation by 7%. The variance against our forecast arose largely from strong motorcycle sales on credit easing by financiers. There is insufficient research coverage by the market to form a consensus estimate.

YoY, its FY24 revenue fell 9% mainly due to weaker motorcycles sales on the back of credit tightening by motorcycle financiers (which has since eased from 3QFY24). Its plant utilisation levels at both Yamaha Motor and Guocera production plants remained stable at 70%-80%. Meanwhile, its associate Yamaha Motor Vietnam (YMVN) saw weaker contribution of RM37.7m (-24%) due to market share loss.

However, its core net profit grew 18% on: (i) an average price hike of 5%, (ii) a shift in product mix away from mass-market models, i.e. 125- cc and below, of which demand is slowing, towards more premium models such as Y16ZR and Y15ZR, and (iii) higher margins realised from the new-generation Y16ZR ABS, Y15ZR SE, XMax 250 and Ego Gear.

QoQ, its 4QFY24 revenue rose 2% driven by higher production volume of the new model Yamaha Y16ZR ABS (launched in Jan 2024) and credit easing by motorcycle financiers. Its core net profit soared 32% on favourable sales mix toward premium models as well as lower tax rate of 22.4% vs 23.6% in 3QFY24.

Outlook. It introduced the all-new Yamaha PG-1 (priced from RM6,998) in August 2024, which is expected to be a new volume-driven models (expected to produce at least 500 units per month, with production scaled- up thereafter based on demand). It looks to build a new Guocera tiles plant with production expected to begin in 2026. The new tiles plant will be fully automated that can produce a bigger format size tiles which entailed a higher margin compared to existing production line.

Forecasts. We raise our FY25F net profit forecasts by 7%. We now project both Jul 2024 - Jun 2025 industry sales volume and Yamaha sales volume to increase by 5% YoY (vs. +2% previously). We increase industry sales volume to 640k units (from 620k units) and Yamaha sales volume to 320k units (from 300k units). We are slightly more positive for FY26. For the period from Jul 2025 to Jun 2026, we projected industry and Yamaha sales volumes of 640k units and 320k units, respectively.

Valuations. Correspondingly, we upgrade our TP by 7% to RM13.50 (from RM12.60), based on unchanged PER of 12x on FY25F EPS, at 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 by 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).

Investment case. We continue to 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 RM1.7b which could be deployed for earnings-accretive acquisitions. Its dividend yield is attractive at 5%. 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 - 27 Aug 2024