We attended BAUTO's exclusive preview of Xpeng X9 and Deepal S07, their latest addition of China EV model after the launch of Xpeng G6 earlier. To be competitively priced against Zeeker 009 and Tesla Model Y, we estimate sales volume of 1,800 units/year for both which could partially fill the vacuum left by the Mazda brand which is facing intense competition. BAUTO currently trades at 7.0x on FY25F EPS, which is cheap versus 5-year historical average of 11x with record low foreign shareholding level after the recent share price downtrend. We maintain our forecasts, TP of RM2.20 and OUTPERFORM call.

Xpeng X9 and Deepal S07 out-pricing its competitors. We attended BAUTO's exclusive preview of Xpeng X9 and Deepal S07 EV yesterday.

It was an exhilarating moment with journalists and corporates eager to experience the new models which are expected to be launched in the 2HCY25. The Xpeng X9 (large MPV, estimated at around RM300k) and Deepal S07 (mid-size SUV, estimated at RM150k-RM170k) are expected to be competitively priced against Zeeker 009 (around RM350k) and Tesla Model Y (above RM190k), respectively.

Based on our observation of Xpeng G6 sales (c.130 units/month), we estimated monthly sales of 20 units for Xpeng X9 and 130 units for Deepal S07 or a total of 1,800 units/year which could fill in the vacuum left by Mazda brand due to intense competition with other China brands.

Note that, Mazda brand sales target for FY25 is at 13,000 units (-30%).

Deepal S07 is powered by a 258 PS/320 Nm rear-mounted motor fed by a 66.8 kWh ternary lithium NMC battery, which offers up to up to 485 km of NEDC range with DC charging rates of up to 78 kW and quoted with a 30-80% DC charge time of 35 minutes. In-car features include a driver's head-up display with AR navigation, a 15.6-inch touchscreen powered by the Snapdragon 8155 chip, 14-speaker SONY audio system, wireless Apple CarPlay, an expansive panoramic glass roof, ventilated and massage-ready front seats etc. Deepal S07 is the slightly larger version of the S05 and on-par with several midsize EV SUVs such as the Xpeng G6, BYD Sealion 7, and the Tesla Model Y.

Both S07 and S05 will be officially launched in Malaysia in the 2HCY25.

Xpeng X9 are powered by the 84.5-kWh lithium iron phosphate (LFP) battery for up to 610 km of range (CLTC standard) and second variant are powered by the 101.5-kWh nickel manganese cobalt (NMC) battery for more range at up to 702 km, with both for FWD variants (0-100 km/h time of 7.7 seconds). There could be a third variant, an all-wheel drive with the same NMC battery and dual electric motors (quicker sprint time of 5.7 seconds) but with less range at 640 km. The MPV will get from a 10-80% state of DC charge in at least 20 minutes.

Competitors includes the Zeekr 009 (launched here earlier this month), Denza D9 (pre-booking opened, launching soon) and the established Toyota Alphard and Vellfire. To stand out from the crowd, the X9's design is particularly eye-catching, with a steeply angled rear window instead of a flat tailgate that most MPVs have. On the inside, the X9 is similar to the G6 by having a minimalistic dashboard where almost all vehicle functions are integrated into a 17.3-inch touchscreen infotainment system. Other features include a 10.25-inch digital instrument cluster, a 21.4-inch display for rear passengers, a panoramic glass roof, an Xopera 23-speaker sound system, a refrigerator, a comprehensive Xpilot ADAS suite as well as "airline-style" seats in the second row with heating, ventilation and massage functions.

Forecasts. Maintained, as we expect the X9 and S07 sales volumes to partially fill in the vacuum left by Mazda brand.

Valuations. We also maintain our TP at RM2.20 based on 10x CY25F PER, at a 1x multiple discounts to the sector's average forward PER of 11x to reflect higher earnings risk for mid-market auto players on subsidy rationalisation which will hurt their target customers, i.e. the middle-income group, the most. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 4).

Investment case. We continue to like BAUTO for: (i) its strong near-term earnings visibility backed by an order backlog of 1.2k units for Mazda, Xpeng and Kia vehicles, (ii) its premium mid-market Mazda brand that offers superior margins, and (iii) its attractive dividend yield of about 12%. Its share price has declined 14% YTD, which we believe has been factored in with BAUTO now trading at 7.0x based on our FY25F EPS, which is cheap versus 5-year historical average of 11x and auto sector's average forward PER of 11x. The stock foreign shareholding level is also at a record low of 19.58% compared to c.23% a quarter ago and two years ago at 32%. Maintain OUTPERFORM.

Risks to our call include: (i) consumers cutting back on discretionary spending (particularly big-ticket items like new cars) amidst high inflation, (ii) supply chain disruptions, (iii) escalating input costs, and (iv) MYR weakens against JPY.

Source: Kenanga Research - 24 Jan 2025